Long-term deposit is expected to remain in the business financial statement for a longer time. From an accounting perspective, two events require accounting treatment for the long-term deposits, which include recording and disposing of long-term deposits from accounting books.
Accounting for recognition of long-term deposit
The following journal entry is posted in the business records when a long-term deposit is paid (for customer business).
| Description | Debit | Credit |
| Long-term deposit (asset) | ||
| Bank | XXX |
The debit impact of this transaction is to record a long-term deposit in the asset account. This recording reflects that the long-term deposit remains an asset on the balance sheet. On the other hand, the credit impact is reducing cash from the accounting record as it was paid.
The following journal entry is posted in the accounting records when receiving a long-term deposit (for service provider business).
| Description | Debit | Credit |
| Bank | XXX | |
| Long term deposit (Liability) | XXX |
The debit impact of this transaction is to record the payment received from the bank. The credit impact is recording the long-term deposit, as this balance remains payable in the business accounting record.
Accounting for removing long-term deposit
When a long-term deposit is received after the contract is completed, the following journal entry is posted in the records (for customer business).
| Description | Debit | Credit |
| Bank | XXX | |
| Long-term deposit (asset) | XXX |
The debit impact of this transaction is receiving cash in the bank. On the other hand, the credit impact is removing a long-term deposit from the accounting record as it was received back.
The following journal entry is posted in the business records when the long-term deposit is paid back after the contract is completed (for service provider business).
| Description | Debit | Credit |
| Long term deposit (Liability) | XXX | |
| Bank | XXX |
The debit impact is removing the long-term deposit (liability) from the accounting record as it was settled. On the other hand, the credit impact is reducing the bank balance as the amount was paid back to the customer.
Conclusion
Long-term deposits are expected to remain in the accounting books for the long term. Paying long-term deposits results in recording this balance as an asset for the customer. On the other hand, when the (service provider) business receives a long-term deposit, it’s recorded as a liability in the accounting books as they are required to payback at the end of contractual term.
Daniyal Khatri, ACCA, is a seasoned bookkeeping specialist with over a decade of experience in designing precise, compliant financial systems. His expertise spans daily transaction tracking, ledger management, and financial record accuracy, ensuring businesses maintain organized, audit-ready books. Daniyal excels at aligning processes with evolving compliance standards, integrating user-friendly tools to automate workflows, and translating regulatory complexities into actionable steps. By combining technical proficiency with a focus on clarity, he empowers organizations to achieve error-free bookkeeping, minimize risk, and build a foundation for informed financial decisions.
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