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Mind boggled accounting entry question: Partial Card refund

Trying to issue a partial (50%) refund of a booking fee/security deposit on a credit card. So half will actually be refunded; the other half will reduce the deposit liability by $500(50%). Just cannot figure out how to reduce the liability; Quicken wants me to make the change in my business checking account(not the liability account) and thus I would be altering the actual refund cash amount. Should I just enter a new transaction reducing the deposit account by the $500?

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Answers

  • Frankx
    Frankx SuperUser ✭✭✭✭✭
    Hi @maineuropa,

    So, while you didn't indicate it, I assume that your the landlord and are trying to refund a portion (50%) of a tenant's deposit.  Since you mention a "credit card", presumably you have previously "charged" the tenant's credit card with the full amount ($1,000.00).

    The original entry, then was as follows:

    Bank/Cash Account   -  debit                            1,000.00
    Liability for Tenants' Deposits  -  credit                                1,000.00

    The new entry would therefore be:

    Liability for Tenants' Deposits  -  debit                  500.00
    Bank/Cash Account   -  credit                                                 500.00

    If Quicken is forcing you to make the payment from a different "Bank/Cash Account" from the one you originally deposited the security deposit into, you may need to make an entry between the two Bank/Cash accounts, to get them both into balance.

    Let me know if you have any followup questions.

    Frankx


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  • maineuropa
    maineuropa Member
    Sorry but its a bit more complicated than that. The first step you describe I did when the deposit was made. The part I cannot mentally account for is the refund of half the cash amount of the deposit, combined with a full reduction of the liability($1000). There is no cash involved in the second half of the reduction; it is more of a loan forgiveness type transaction. We are refunding only half of the deposit (credit card refund) but eliminating the full $1000 deposit liability.
  • maineuropa
    maineuropa Member
    Treating the forgiven part as income was the missing step for me. Thanks for the help! All forgiven debt is income anyway..just was happy to have a senior moment I guess!
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