Rental Bond

Question

Our office premises have been sold to a new owner, so we need to have the original bond returned to us & pay another bond to the new owner. The payment of the original bond was allocate to Current Asset account Rental Bond, do I use the same account when I receipt the return of the orignal bond & payment of the new one? Thank you.

KevinR · Accepted Answer

You would use the same "Rental Bond" asset account to keep track of the asset you have in the form of the rental bond.

When the original bond is returned, you would debit your cash/bank and credit your 'rental bond' account and when it is paid back to the new owner, you would credit your cash/bank and debit your 'rental bond' account. There would not be any entries to impact p&l as they are not business activity to record as earnings or spendings. As always check with your accountant for proper advice.

As a side note, if your company is leasing the premises through a real estate agency, the bond transaction might be handled by the agency directly, meaning the return and payment of the bond may not even appear in your company's accounts.