Overview:
Include the security deposit under Additional Payments.
When recording the security deposit, the journal entry would debit Security Deposit and credit Cash. On the return date, the journal entry would be reversed, debiting Cash and crediting Security Deposit.
This video shows how to enter a security deposit and the financial impact:
Video length: 2 mins
Alternatively, you can follow the steps below.
Step 1: Select the applicable agreement
Step 2: Click on “Additional Payments” tab then select “Deposits”
Step 3: Click "+ Deposit", then enter the payment date, return date, and the deposit amount.
What Are the Financial Impacts?
Example: A lease with a security deposit recorded on the start date, 2023-01-01, which will be returned at the end of the lease, 2025-12-31.
On 2023-01-01, the journal entries in Cradle would be as follows:
On 2025-12-31, the journal entries in Cradle would be as follows:
FAQ:
How should I record a non-refundable security deposit in my lease? If the non-refundable security deposit qualifies as a lease payment, it should be included as part of the initial recognition of the lease payments.
For more information on the definition of a lease payment:
Refer to this help article for IFRS 16.
Refer to this help article for ASC 842.
Further Reading: