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Topic
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Our Strata Corporation delivers a secure FOB to new residents of the building, against of a refundable deposit of $ 200 per FOB. How should this money be shown in the Financial Accounts?
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This might sound really budget (pardon the pun) but the supply of the FOB could be shown in the Administrative Fund Accounts, under Income as “security fob deposits” and under Expenses as “security fob refunds”; why do you ask?
Asked and answered!
Although there are two problems with the answer, the first being that I’m a CPEng and not a CPA, and the second is that your query is about the accounts of an Owners Corporation and not those of BHP Billiton.
My approach to the former has always been to not use esoteric account names and accounting techniques that makes it difficult for Owners to ascertain what the corresponding expense was actually for and which allow a plethora of expenses to be buried within them, and to “properly account” in a way that’s transparent and which allows Owners to easily understand what’s happening with their funds.
But then that’s my approach.
The refundable component should be shown as liability on the balance sheet. While the charge to the owner and the cost of producing a new FOB would be shown as income and expense.
If, for example. it costs the OC $20 to produce to FOB and there was refundable deposit required of $200, then the OC most likely with charge the owner $220. Which may appear as
$20 (Credit) “Other or Key Income” on Income and Expenditure Statement
$20 (Debit) “keys / fobs expense” on Income and Expenditure Statement
$200 (Credit) “Security Deposits” in Liabilities on the Balance Sheet
As Whale says, the account names are dependant on your particular setup and may not need to be broken down too far. But I would say (IMO) it is essential that the refundable component is held in a Balance Sheet liability account.