How to record rent against security deposit paid to owner?

Hi jishnu-reghu,

Thank you for explaining everything in detail. I'll guide you in recording your payment against your security deposit account.

Since we can't directly take funds from a current asset account to pay a bill or an expense, you can move the funds into Barter/Wash/Clearing account first. Then, record your rent payment against it.

Set up a clearing account:

1. Click on Gear icon and choose Chart of Accounts.
2. Click on See your Chart of Accounts and click on New.
3. Select Bank for the Account Type.
4. Select Cash and cash equivalents for the Detail Type.
5. In the Account Name field, enter Clearing Account, Barter Account, or Wash Account.
6. Do not put an opening balance.
7. Choose Save and close.

Move funds from the security deposit account to the clearing account:

1. Click on +New and choose Journal entry.
2. On the first line, enter the following:
   ACCOUNT: Clearing account
   DEBIT: 31500
3. On the second line, enter the following:
   ACCOUNT: your security deposit account
   CREDIT: 31500
4. Enter a memo in reference to this transaction, but this is optional.
5. Click Save and close.

Record a bill payment or expense against your clearing account:

Speaking of clearing accounts, it is usually a bank type that has a zero balance and is used when recording barter transactions between customers and vendors. It is also used to move funds between accounts if you can't directly use them on a transaction, like this one. I'm sure your accountant can shed more light on this type of account.

If you have more questions, please feel free to reach back out. Have a good day!