Income seems like such a straight-forward concept, and it's easy to think of all deposits as income.
But not all deposits are income
even though you are adding money to the business's checking, savings, or other financial account.
The company borrows money.
This could be from a bank or other lending institution, a cash advance on a credit card, or
the owner(s) personally loan the company money.
When the company borrows money, regardless of the source, it is not income.
A liability account should be set up because this money will be repaid at some point.
It may be a Current Liability (short-term) or a Long-term Liability (a year or greater).
It may be repaid on a regular schedule or as a lump sum payoff.
As the company pays down (or totally pays off) this loan,
the liability account (the amount the company owes) will decrease.
These payments do not have any impact on income or expenses.
It all happens in the asset and liability accounts.
The company owns rental property(s).
Generally, when a property is rented to a new tenant, a security deposit is required.
This security deposit is not income.
It, too, is a liability for the company.
At some time in the future, when the tenant leaves,
some or all or none of the security deposit may be returned to the ex-tenant.
The liability account for the security deposit(s) would be reduced because
the company no longer owes the money to the ex-tenant.
When the tenant leaves and no security deposit is returned because of damages,
the liability account is still reduced in full (the original security amount)
and that amount will now be considered income.
Expenses will be incurred when the repairs are actually made.
The same is true for a partial refund of the security deposit;
the entire security deposit amount will be removed from the liability account.
Part of it will be returned to the ex-tenant (by writing a company check to the ex-tenant)
and the remainder will be treated as income.
Again, expenses will be incurred when the repairs are actually made.