for accounting purposes what type of account (asset, negative asset, liability) on the chart of accounts should a security deposit and/or a last month rent payment that is held by a landlord be classified as?
Your security deposit should be put in the security deposit acct. which is an other current liability and your last month's rent should go to a prepaid rent acct, which is also an other current liability.
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Are you asking from the perspective of the landlord or lessee?
Landlord - security deposit would be a Liability , and the final months rent would be a Deferred Revenue (current or non-current status for both would depend on whether the lease is for more or less than 12 months).
Lessee - security deposit would be an Asset, and the final months rent would be a Prepaid Expense. Again, classification between current and non-current would depend on the length of the lease.
In practice, it is rare to see security deposits and the final months rent in the long-term category. Most financial statement preparers would lump it in with Current Assets/Liabilities.
Also, as an FYI, many states require that the security deposit be segreated from other funds by the landlord by placing it in a separate bank account.
As a lessee how do I book the return of a deposit at the end of a lease?
Record a deposit and under the From Account use the same current asset account you posted the deposit when you paid it.
Reka
