It is common practice to require a tenant to pay a deposit on occupation of a rental property. The rent is intended to secure at least one month’s worth of occupation and provide for potential damages caused by the tenant. Rent deposits are regulated in terms of Rental Housing Act 50 of 1999.

A common feature in managing rental properties, the underlying accounting mechanisms are typically not well understood which often leads to deposits not being accounted for at all, leading to invisible transactions and inaccurate records.

In order to properly account for a rental deposit, the following needs to occur

• Debit tenant account with a Deposit required
• Credit tenant account when payment is received
• This will zero the tenant account
• Payment received from the tenant will create a credit on the ledger, but it is not available for pay out to the landlord; to balance this credit, the deposit amount must be invested
• Debit the ledger with the investment payment

At this point, the ledger will reflect only the regular monthly rent roll transactions, and the rent deposit investment is accurately and comprehensively accounted for.

Once the rental agreement terminates, these steps are reversed to release the credit on the ledger

• Credit the ledger with the amount received from the investment. Note that due to the effect of interest accrued this amount will be more than the initial deposit received
• This receipt will result in a credit balance. This credit can be paid to the tenant as a refund, or paid to the owner as settlement
• Pay out of this amount will normally zero the account

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