Deposits

Deposits is a current liability account in the general ledger, in which is stored the amount of funds paid by customers in advance of a product or service delivery. These funds are essentially down payments. For example, a company may require a large deposit from a customer before it begins work on a highly customized product. Otherwise, the seller is at risk of loss if the customer cancels its order prior to delivery. When a customer payment is instead treated as a security deposit, the account may instead be named security deposits, in order to more clearly differentiate the nature of the liability.