How do you record a deposit on utilities?

Definition of Deposit on Utilities

A new customer of a public utility (electricity, natural gas, telephone, etc.) may be required to pay a refundable amount known as a utility deposit or security deposit before the public utility will provide services. After a period of time, the public utility will refund the customer's utility deposit.

Example of Recording a Deposit on Utilities

Assume that a new business is required to pay $500 as a security deposit to an electric utility before the utility provides electricity. The deposit will be refunded by the utility after six months of timely payments.

The new business will record the deposit with a $500 debit to the current asset account Utilities Deposits and will credit the asset account Cash for $500.

The electric utility will record the customer's security deposit with a $500 credit to the current liability account Customers' Security Deposits and will debit its Cash account for $500.