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Imagine you have a real estate firm. You receive security cheques from customers against the rent.
A security cheque is normally a post dated cheque. Normally, we, accounts & finance professionals do not record such type of post dated contingent checks in the books of accounts and keep their record in separate excel file or in register to remember and file such checks until expire, return or cashed. In case of expiring or returning of check, we cancel these from the register and in case of cashed / deposit due to contingency (e.g., in this case if rent will not pay by tenant than the checks will be deposit against such non payment of rent) we record this as normal rent transaction. Normal transactions for rental, in case of rent received in beginning of the period, we will record it as;
Bank (Dr) - Current Assets Advance / Unearned Rent (Cr) - Current Liabilities
After the expiry period, we will record an adjusting entry Advance / Unearned Rent (Dr) - Current Liabilities Rent Income (Cr) - Revenue/Income
