PROFIT AND LOSS ACCOUNT

Create an asset which has the characteristics of a liability in the asset form which needs to be realised.

Security deposit a/c -assets

To creditors a/c -liabilities 

when payment is made:

Security deposit expense a/c

To Bank a/c

when you loose the deposit:

SPLOCI-PL

To Security deposit a/c

But the above procedure is wrong because you are actually expensing and adding loss over it to profit and loss. So, to be prudent in recording journal entries, the following method is best:

Security deposit a/c -asset

To Bank a/c

when you loose your deposit:

Loss on deposit a/c p&l

To Security deposit a/c -asset

For this purpose, you don’t recognise it as an expense in accruals because you will always get that amount back