How to Record Security Deposit Interest and Return the Interest Amount

Does the security deposit you record on a lease accrue interest over time, and do you need to record it properly? This article will record the best way to record this interest amount to track everything properly with the Rentvine System.

Recording Bank Interest (via Journal Entry)


Recording Bank Interest (via Other Receipt)


Refunding the Bank Interest

Recording Bank Interest (via Journal Entry)

1. First, you will want to have a GL in your chart of accounts created for "Security Deposit Interest" or something similar, and that will need to be a liability account. If you do not have a security deposit interest account, you can create one under your Chart of Accounts.
   
   
   
   
   
2. Once that GL account is created, you will want to create a new Journal Entry
   
3. On the left side of your screen, click on Accounting
4. Then, click on Transactions
5. Click on the green Actions button on the far right
6. Click on New Journal Entry from the drop-down menu
   
   
7. In the New Journal Entry screen, complete the fields to record the interest earned
   1. In the Ledger field, type in the property, and select that ledger. This will ensure the interest gets applied to the property as an increase for the Security Deposit Interest
   2. The Date Posted will default to today, but you can edit that to the day you received the interest
   3. Enter a Description that explains the journal entry (i.e. May Bank Interest Earned)
      
   4. In the first Account field, select the GL account for Security Deposit Interest, or the GL account you created. Enter $0 for the Debit field, and the amount of the interest you earned in the Credit field
   5. In the second Account field, select the bank account on which the interest was earned. Enter the amount of interest you earned into the Debit field, and $0 in the Credit field
   6. You should now see that the debits equal the credits. If so, you are finished adding your entries
      
      
   7. Click the green Save button
      
      
      To check and make sure this interest is applied correctly, you can view the ledger tab from your property management company's portfolio. You should see the income coming into the portfolio. You can also run a bank ledger report to view the increase. 
      
      
8. You'll now see that Security Deposit and Escrow amounts have been increased
   
   
   
   
   
   
   

Recording Bank Interest (via Other Receipt)

1. First, you will want to have a GL in your chart of accounts created for "Bank Interest Earned" or something similar, and that will need to be a liability account.  If you do not have a security deposit interest account, you can create one under your Chart of Accounts.
   
   
   
   
2. Once the chart of account is created, you will want to create an Other Receipt.
3. Click the rocket ship located at the top right
   
   
   
   
4. Select Record Other Receipt 
   
   
   
   
5. In the New Other Receipt screen, complete the fields to record the interest earned
   1. Apply to (Ledger) : Select the property, this interest is attached to.
   2. Received From : Here you can enter Bank Interest, or what you deem fit for you and your team to understand best
   3. Amount Received : The amount the Interest increased by
   4. Income Account : Select the liability account that was created for the interest
   5. Receipt Date : When this interest occurred 
   6. Reference (optional): A reference number or title if there is any
   7. Description (optional) : A brief description of this, such as Bank Interest
   8. Bank Account : The Bank Account that was increased
   9. Payment Type: How the was received, in this case you can put Other

  6.  You'll now see that Security Deposit and Escrow amounts have been increased

Refunding the Bank Interest

Depending on the situation at hand, you may want to refund the total interest amount to either the tenant, owner, or property management company. This section will go over all these options.

Refund Interest to Tenant

Refund Interest to Owner

Refund Interest to Property Management Company

Refunding Interest to Tenant

1. If the interest accrued over time is supposed to be given to the tenant, navigate to the lease in question.
   
   
   
   
   
2. Click the green actions button and select Add Credit
   
   
   
   
   
   
   
3. On the Add Tenant Credit screen, fill in the fields
   1. Account : Select the Chart of Account that we created
   2. Amount : The Amount of Interest being refunded to the tenant
   3. Date Posted : The date posted for the tenant credit
   4. Description : A brief description stating this is a credit for the Security deposit interest
      
      
   
   
   
   
4. Once the credit is created, you can refund the tenant through the move out flow if this lease is coming to an end or through the refund process. These articles go through this process as well:

• Refunding a Tenant
• Refunding Tenants through the Move Out Flow

Refunding Interest to Owner

1. If the interest amount is going to the owner, you will need to do a bank transfer of the interest amount from the Security Deposit Bank Account it is currently attached to into the Trust Account.
   If you want to send the funds directly to owner from the Escrow Account it currently resides in, click here to step 5
2. Click on Accounting > Banking > and select the green Actions button to create a new Bank Transfer
   
   
   
   
3. On the Bank Transfer screen, enter the details required
   1. Source Bank Account : Select the Bank Account the Interest currently resides in
   2. Destination Bank Account: Select the Bank Account that it will go into
   3. Amount : Enter the amount the Interest is for
   4. Reference (optional) : Enter a reference if needed
   5. Description (optional) : Enter a brief description stating the reason for the transfer
   6. Date Posted : The date the transfer occurred 
   7. Ledger / Amount : Select the Property and the amount again that is being transferred 
      
      
4. After the bank transfer is recorded, you will need to create a bill. Select the rocket ship at the top right and click Add Bill
   
   
   
   
5. On the Bill Screen, enter the details required
   1. Payee : Select the owner contact this is going towards
   2. Bill Date : Enter the desired Bill Date
   3. Date Due : Enter the desired Date Due
   4. Description : Enter the description stating this is going towards the owner
   5. Payer : Select the property this is for
   6. Account : Select the Security Deposit Interest Account we initially created
   7. Amount : Enter the amount being sent to the owner
   
   
   

  6. Once the bill is created, you can pay the bill out as normal to pay the owner out

Refunding Interest to Property Management Company

1. If the interest amount is going to the owner, you will need to do a bank transfer of the interest amount from the Security Deposit Bank Account it is currently attached to into the Trust Account.
   If you want to send the funds directly to owner from the Escrow Account it currently resides in, click here to step 5
2. Click on Accounting > Banking > and select the green Actions button to create a new Bank Transfer
   
   
   
   
3. On the Bank Transfer screen, enter the details required
   1. Source Bank Account : Select the Bank Account the Interest currently resides in
   2. Destination Bank Account: Select the Bank Account that it will go into
   3. Amount : Enter the amount the Interest is for
   4. Reference (optional) : Enter a reference if needed
   5. Description (optional) : Enter a brief description stating the reason for the transfer
   6. Date Posted : The date the transfer occurred 
   7. Ledger / Amount : Select the property and the amount again that is being transferred 
      
      
4. After the bank transfer is recorded, you will need to create a bill. Select the rocket ship at the top right and click Add Bill
   
   
   
   
5. On the Bill Screen, enter the details required
   1. Payee : Select the property management contact 
   2. Bill Date : Enter the desired Bill Date
   3. Date Due : Enter the desired Date Due
   4. Description : Enter the description stating this is going towards the owner
   5. Payer : Select the Property this is for 
   6. Account : Select the Security Deposit Interest Account we initially created
   7. Amount : Enter the amount being sent to the Property Management Company
   
   
   
   
   

6. Once the bill is created, you can pay the bill out as normal to pay your company.