Security deposit three-way reconciliation

Security deposit three-way reconciliation tests three different representations of the same custody position. The resident subledger says whose deposits are held; the general-ledger liability says how much is owed in total; and the bank or legally required holding arrangement provides external cash evidence. Each leg has a different purpose, so agreement between only two does not prove the third.

Run the comparison for the same legal entity, account, property scope, and cutoff. Start with each resident’s deposit amount and status, total the detail, compare it with the liability account, then reconcile the applicable bank balance after documented outstanding items. Do not assume the cash must always equal the liability without considering lawful account structure, interest, fees, timing, and jurisdiction-specific requirements.

Refundable deposits generally are not rental income when they are intended to be returned, while an amount designated as final rent can be treated differently for federal tax purposes. State and local custody, account, interest, notice, deduction, and return rules vary. The reconciliation is an accounting control, not a substitute for checking the rules that govern a particular property.

Failures include deposits recorded only as cash, liability balances without resident ownership, transfers that leave one bank account but never arrive in another, and deductions posted before an authorized disposition. Resolve differences at the resident and transaction level; a portfolio adjustment that forces equality can leave the wrong household balance behind.