Blogger
Share this content
0
4
621

Tenant Deposits held in Deposit Protection Scheme

Taking over a letting agent client from a previous accountant, investigation of their balance sheet and working papers shows they have treated deposits received by my client (and subsequently paid into a Custodial Deposit Protection Scheme) as a bank account - ie a current asset in the balance sheet. There are no creditor balances in the accounts.

Review of the Ts an Cs of the scheme shows that DPS hold tenant deposit through tenancy and repay it when they leave the property - directly to the tenant.

I'm aware there are some discussions already on here regarding the correct accounting treatment - eg. Dr Asset, Cr Deposits refundable, netting off etc but I'm hoping someone might be able to shed any light as to why this would ever have been treated as an asset with no corresponding liability?  Am I missing something?

Replies

Please login or register to join the discussion.

Where do they credit the deposits they receive? If you are right in saying that it is not to liabilities, surely it isn't to profit?!

Thanks (0)
avatar
By rhart42
27th Feb 2016 17:11

Yikes!

johngroganjga wrote:
Where do they credit the deposits they receive? If you are right in saying that it is not to liabilities, surely it isn't to profit?!

That's exactly what I'm worried has happened!

Thanks (0)
avatar
27th Feb 2016 23:54

And what did they do...
...when someone had their deposit back (I.e where did the debit go?)

Thanks (0)
avatar
By rhart42
28th Feb 2016 08:22

There are some strange 'balance/unreconciled' items in the sales/purchase control accounts which I believe may - over a period of time - represent the debit/credit entries.

 

At the year end, they have included the 'bank' balance as the balance equivalent to the amount held in the DPS!

Thanks (0)