The Transfer Deposit with Interest process allows users to move a tenant’s security deposit, including any accrued interest, from one lease to another. This is typically used when a tenant transitions between leases and the deposit needs to be carried forward rather than refunded. The process ensures that both the deposit principal and its associated interest are properly reassigned to the new lease while maintaining full accounting traceability.
From an accounting perspective, the system first reclassifies the accrued interest by moving it from the interest liability account to a designated clearing account. It then generates an internal invoice for the new deposit amount on the target lease, bringing the balance into the Accounts Receivable (AR) ledger. This invoice is not a revenue-generating document, but rather a technical mechanism that enables the system to manage the transfer within the AR framework. At the same time, the new deposit with all the required information (type, refundable flag, interest setup, original amount, invoice number and status) is recorded on the destination lease, reflecting the updated deposit requirement.
Once the invoice is created, the system generates an adjustment for the total transferred amount (original deposit plus interest) and applies it against the invoice. Depending on the relationship between the new deposit amount and the transferred total, three outcomes are possible:
-
If the invoice amount is greater than the transferred total, the adjustment is fully applied and the invoice remains partially paid, leaving an outstanding balance equal to the difference, which represents the additional deposit owed by the tenant.
-
If the invoice amount equals the transferred total, the adjustment fully offsets the invoice and it is marked as paid.
-
If the invoice amount is less than the transferred total, the transaction is considered invalid and the system prevents completion by returning an error.
As a result of this process, the original deposit and interest liabilities are cleared, and the transferred amount is applied toward the new lease’s deposit requirement. The transaction is fully traceable through the generated general ledger entry, invoice, and adjustment, ensuring accounting integrity while supporting operational workflows such as lease transitions and deposit adjustments.
When processing a Transfer Deposit in the SIRE app, the system will first check if an interest setup exists for that deposit. If so, interest-related fields will be displayed on the Transfer screen to complete the process correctly.
Key Fields on the Transfer Screen for Deposits with Interest
These fields are important for correctly calculating and recording the interest:
|
Field |
Description |
|---|---|
|
Adjustment Date |
This is the cut-off date for calculating interest. The interest amount will be calculated up to this date. |
|
Interest Exp/Clr Account |
This is the General Ledger (GL) account used for the expense or clearing of the interest. It is auto-filled from the lease’s interest setup. |
|
Interest Liability Account |
This is the GL liability account that records the interest owed to the tenant. It is auto-filled from the lease’s interest setup. |
|
Interest Amount |
This shows the calculated interest on the refunded amount. It is not editable and is automatically determined based on the refund and lease setup. |
|
Total Amount |
This is the sum of the refund amount and the interest amount. It represents the full amount payable to the tenant. |
How Interest is Calculated
If the interest setup uses compound interest, the SIRE app uses the following standard formula:
Compound Interest Formula
A = P(1 + r/n)^(nt)
Where:
-
A = Final amount including deposit and interest
-
P = Original deposit amount
-
r = Annual interest rate (as a decimal, e.g., 5% = 0.05)
-
n = Number of times interest is compounded per year
-
Example: Annually (n = 1), Quarterly (n = 4), Monthly (n = 12), etc.
-
-
t = Number of years the deposit was held
Example:
If a deposit of $1,000 is held for 2 years at an annual interest rate of 5%, compounded annually:
A = 1000 × (1 + 0.05/1)^(1×2) = 1000 × (1.05)^2 = $1,102.50
The interest amount would be $102.50 and the total refund would be $1,102.50.
✅ Summary
-
The SIRE app automatically calculates interest if it’s configured on the lease.
-
You’ll need to confirm the correct GL accounts.
-
The Transfer screen displays all the necessary fields—some auto-filled, some user-editable.
-
The system ensures accurate accounting for both the deposit and the interest owed.
-
The Adjustment would have one line with the Apply amount and one line with the Interest amount displayed.
-
A GL journal entry would be created with the Interest accounts and the interest amount displayed.