How to Account for Bottle Deposits

Save

Many services require deposits on bottles or other rentable containers that are refunded when you return the container to the rental store. Because a bottle deposit is a refundable item, it is not an expense of the business unless you never receive the refund. Generally Accepted Accounting Principles (GAAP) considers refundable deposits made for the business an asset of the business as you have an expectation of the return of the money. Assets appear on a company’s balance sheet rather than the income statement and therefore do not impact operating income or expense.

Things You'll Need

  • General ledger
  • Receipt for bottle rental

Create a Bottle Deposits account in the Assets section of the general ledger.

Reduce the Checking account in the Asset section of the general ledger by the amount of money you paid for the bottle deposit and the substance purchased in the bottle. GAAP considers a decrease to an asset a “credit.”

Increase the appropriate expense account in the Expense section of the general ledger by the cost of the substance purchased. For example, if you paid for a water bottle and water, you may record the cost of the water to the Office Expense account. GAAP considers an increase to an expense account a “debit.”

Increase the Bottle Deposits account by the amount of money paid for the deposit on the bottle. This is also the amount you expect to receive when returning the bottle. GAAP considers an increase to an asset account a “debit.”

Tips & Warnings

  • When you receive the bottle deposit refund, increase your checking account and decrease the Bottle Deposits account by the amount received. This should zero out your Bottle Deposits account.
  • If you are not certain how to account for secured deposits, consider hiring an accounting professional to assist you.

Related Searches

References

  • “Principles of Accounting”; A. Douglas Hillman, Richard F. Kochanek and Corine T. Norgaard; 1991
Promoted By Zergnet

Comments

You May Also Like

Related Searches

Check It Out

Are You Really Getting A Deal From Discount Stores?

M
Is DIY in your DNA? Become part of our maker community.
Submit Your Work!