Cash received can still be owed back
A refundable security amount may protect the company against damage, nonperformance, unpaid charges, or another contractual risk. Until a valid application occurs, the company can still owe that amount to the counterparty.
Posting it directly to sales can make revenue and customer balances misleading.
Track deposits by counterparty and agreement
Maintain the payer, date, amount, contract, purpose, conditions for use, expected return date, and any interest or segregation requirement that applies.
Keep the balance separate from ordinary customer receivables or advance payments for future services.
Apply deposits only with documented support
If the contract allows the company to use the deposit against damages, unpaid invoices, or another obligation, document the reason and calculation before reducing the liability.
If the deposit is refunded, link the outgoing payment to the original receipt.
Reconcile deposits before contract termination
Review the balance when the relationship ends, including unresolved invoices, claims, credits, or deductions. A final statement helps both parties understand how the deposit was settled.
Old deposit liabilities should not remain on the balance sheet simply because nobody remembers the original customer.
Questions buyers usually ask
Is a refundable deposit received from a customer revenue?
Not simply because the cash was collected. A refundable amount can remain a liability until it is returned or applied under the agreement.
How should a security deposit be cleared?
Use the contract and final settlement to document any amount applied, refunded, or otherwise resolved.
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