Entry for security deposit

That treatment is ok

You can classify the Bulder as Creditor, nothing wrong in it. Creditor does not mean only for Material Purchases.

DILIP YOUR ENTRY IS ABSOLUTELY CORRECT....

dear dilip

i think you are doing wrong

as security deposit was refundable after complation of the work so it connot be treated as cerditors it should be treated as security deposit only.

and 1st entry was not required as same amount was shown as contingent liability untill the payment was not made to the builder.

CA shriniwas Khadloya

Your treatment will have no adverse effect on the books accounts.

Only the thing is you are passing one additional entry.

If you pass it as follows then also it will be sufficient: -

Security Deposit "Project X" A/c  Dr.

     To Cash/Bank A/c

(Being amount paid towards security deposit to MR. .............)