If you are in the real estate management business, security deposits can be very tricky.
The most common mistake made is the improper handling of these trust accounts.
As you may know, in many cases there are distinct differences between residential and commercial security deposits. Much of this has to do with the lease, but commercial security deposits generally do not accrue interest, while residential deposits generally do. When you multiply this by several different owners who have several different buildings, the problems grow substantially.
Balance sheet treatment of this money is also difficult. It can be handled in different ways because it does not belong to you in the first place. When it is converted into a repair at the end of a lease or a refund, there is a specific way to handle it. Another common mistake made is that the security deposit is not held in a separate account.
Mishandling these funds and not accounting for them properly can open you up to various legal actions. The answers to these questions really come down to years of experience and professionalism. Don’t try to do this yourself. As highly qualified and recommended CPA’s and EA’s in the Chicagoland Area, we have developed reasonable answers to these questions. Chris Amundson, President of Accounting Solutions, also owns over 50,000 square feet of commercial, industrial, and retail property on the Northside. We have the experience necessary to handle your accounting needs. The Special Accounting Packages section of this page may have what you need. Whether you have a new business, an audit, need returns filed, or just a second opinion, we can help. Call or e-mail Chris today.