Overview
A correctly recorded security deposit appears in two places on the balance sheet — once as an asset (cash in your bank account) and once as a liability (the obligation to return the deposit). The two amounts should always match. If they don't, something was recorded twice, recorded incorrectly, or recorded against the wrong account.
Where Security Deposits Should Appear
When you receive a tenant's security deposit and it's recorded correctly, it shows on the balance sheet in two places:
Assets → Bank account: the cash itself, increased by the deposit amount.
Liabilities → Security Deposit: the obligation to return the deposit, increased by the same amount.
The two should always be equal. The deposit is your cash for now, but it isn't your money — you owe it back to the tenant when they move out. That's why both sides of the balance sheet move together.
Owner-held deposits are different. If the property owner — not you — is holding the deposit, it should not appear on your bank account or as a liability on your books. See Record an Owner-Held Security Deposit. If an owner-held deposit is showing up as a company liability, see The Deposit Was Recorded as Company-Held When It's Actually Owner-Held below.
The Liability Balance Is Doubled
The Security Deposit liability shows twice the actual deposit amount.
The most common cause is a manual journal entry that was recorded in addition to a normal Receive Payment or Issue Credit. The system records the liability when the payment or credit is applied to the deposit charge — adding a JE for the same deposit double-counts it.
To fix it:
Open the Chart of Accounts and click into the Security Deposit liability account to see the register.
Look for two entries dated near each other for the same lease and amount — typically one labeled with the lease and one labeled as a journal entry.
Identify which one is the duplicate and delete it. As a rule: keep the entry created by the lease payment or credit, delete the manual journal entry.
Note: Always verify the corresponding bank account isn't also doubled before deleting. If both the bank and the liability are doubled, you have a duplicate at the payment level — fix the payment, and both sides correct themselves.
The Liability Balance Is Negative (Inverted)
The Security Deposit liability shows as a negative number, or appears on the asset side of the balance sheet instead of the liability side.
This usually means more was applied out of the liability than was put in. Common causes:
A withholding or refund was recorded against the Security Deposit liability before the original deposit payment was recorded.
A refund was issued for more than the original deposit amount.
A manual journal entry debited the liability without a corresponding credit posting it first.
The deposit was originally posted to the wrong category (so the liability never increased), but a withholding or refund was correctly posted to the liability later.
To fix it, open the Chart of Accounts register for the Security Deposit liability and trace the entries in date order. Find the point where the balance went negative — the entry causing the issue is the one that has no matching deposit posting before it.
The Deposit Was Posted to the Wrong Account Category
The deposit appears on the lease and was paid by the tenant, but it isn't showing in the Liabilities → Security Deposit account on the balance sheet. Instead, it's showing under rent income, a fee account, or another liability account.
This happens when the security deposit charge was posted with the wrong Category. A security deposit must be posted to Liability > Security Deposit — any other category will route the funds elsewhere on the balance sheet.
To fix it:
Delete the existing security deposit charge — see Delete a Security Deposit Charge from a Lease. Any payment will be reallocated or converted to a credit.
Post a new charge using the correct Liability > Security Deposit category.
Re-apply the existing payment or credit to the new charge.
The Deposit Was Recorded as Company-Held When It's Actually Owner-Held
An owner-held deposit (the property owner is holding the funds, not you) is showing as a liability on your balance sheet — creating a phantom obligation that doesn't reflect reality.
This happens when an owner-held deposit was recorded using the standard Receive Payment workflow instead of the Record an Owner-Held Security Deposit workflow.
To fix it, delete the incorrect payment from the lease's Transactions tab, then re-record it using the owner-held workflow. The liability will clear from your balance sheet, and the deposit will be tracked correctly against the owner instead.
A Pre-DoorLoop Deposit Is Doubled in the Opening Balance
The deposit was already included in the opening balance you entered when setting up DoorLoop, and it's also showing as a separate liability — so the balance sheet shows the deposit twice.
This happens when the deposit on a pre-DoorLoop lease was recorded as a regular Receive Payment instead of an Issue Credit against Equity > Opening Balance. A regular payment adds a new liability on top of the one already in your opening balance.
To fix it, delete the incorrect payment and follow Record a Security Deposit for a Lease That Started Before Your Accounting Start Date to record it as an Opening Balance credit instead.
A Withheld Deposit Is Still Showing as a Liability
The deposit was withheld and applied to charges (e.g., to cover damages or unpaid rent), but the Security Deposit liability still shows the original amount instead of decreasing.
Withholding a deposit should move funds from the Security Deposit liability to an income or expense-recovery account — converting the liability into recognized revenue. If the withholding was recorded as a generic payment or journal entry instead of using the Withhold workflow, the liability never clears.
Re-record the withholding using the proper workflow in Withhold a Security Deposit or Any Lease Deposit on an Active Lease.
I've Checked Everything and the Balance Sheet Still Looks Wrong
If the liability and bank balances don't match after working through the scenarios above, run a side-by-side comparison:
Pull the Security Deposit liability register from the Chart of Accounts.
Pull the Deposit Transactions Report for the same date range.
Compare entry-by-entry. Any entry on one report and not the other is the source of the discrepancy.
If the issue still isn't clear, contact support with both reports attached and the specific lease(s) you suspect are the cause.
Disclaimer
The information provided is not offered by a licensed accountant and is intended for general informational purposes only. It is crucial to verify local accounting laws and regulations independently, as they vary. This information should not be considered a substitute for professional advice. For accurate guidance, consult a licensed accountant familiar with your jurisdiction's specific requirements. The author and publisher are not liable for any damages or losses resulting from reliance on this information.