What is on the balance sheet of a rental LLC?

Assets such as bank accounts, receivables, land, building and improvements less accumulated depreciation; liabilities such as security deposits held, prepaid rent, payables and the mortgage; and the owner's equity.

Are security deposits an asset or a liability?

Both sides show up. The cash in the deposit account is an asset, and the amount you may owe tenants is a liability of the same size.

Why does the building show less than I paid?

Accumulated depreciation is subtracted from the building's cost. Land is not depreciated, so it stays at cost.

Balance Sheet for a One-Property Rental LLC

A balance sheet lists what the LLC owns (assets), what it owes (liabilities) and what is left for the owner (equity) on one date. For a one-property LLC that means the bank accounts, the building and land, the security deposits you hold, the mortgage and the owner's capital. Assets always equal liabilities plus equity, and a handful of simple checks tell you whether the numbers are right.

What the balance sheet is for

The profit and loss tells you how the year went. The balance sheet tells you where things stand on a single day, usually the last day of a month or year. Lenders ask for it, buyers ask for it, and you need it to see whether the deposit money you hold is still there. A one-property LLC makes it easy because everything on the sheet belongs to that one building. That is a main reason to keep one LLC per property with separate books.

A made-up balance sheet, line by line

This is an imaginary LLC that owns one 12 unit building, as of December 31. All numbers are made up.

Section	Account	Amount
Assets	Operating bank account	$18,400
Assets	Security deposit bank account	$9,600
Assets	Reserve account	$12,000
Assets	Rent receivable	$1,450
Assets	Prepaid insurance	$3,900
Assets	Land	$150,000
Assets	Building	$550,000
Assets	Improvements	$30,000
Assets	Accumulated depreciation	($60,000)
Assets	Total assets	$715,350
Liabilities	Security deposits held	$9,600
Liabilities	Tenant prepaid rent	$2,900
Liabilities	Accounts payable	$3,200
Liabilities	Mortgage payable	$468,000
Liabilities	Total liabilities	$483,700
Equity	Member contributions	$250,000
Equity	Distributions	($80,000)
Equity	Retained earnings	$61,650
Equity	Total equity	$231,650

The sheet balances: total assets of $715,350 equal liabilities of $483,700 plus equity of $231,650. Cash and receivables are $18,400 + $9,600 + $12,000 + $1,450 = $41,450, plus prepaid insurance of $3,900 makes $45,350. The property side is $150,000 + $550,000 + $30,000 - $60,000 = $670,000. Together that is $715,350.

Assets: what the LLC owns

Cash accounts come first. Keep the security deposit account separate if your state asks you to, or if you want to see it clearly. Rent receivable appears only on accrual books. Prepaid insurance is a year's premium paid up front that has not been used up yet.

The building and improvements are recorded at cost, not market value. Land is listed apart because the IRS says you cannot depreciate the cost of land, while Publication 527 gives residential rental property a 27.5 year recovery period. Accumulated depreciation is a running total of the depreciation expense taken so far, shown as a subtraction. It lowers the book value of the building without changing what you paid.

Liabilities: what the LLC owes

Security deposits held is the first one people forget. The money in the deposit account is not yours until you keep part of it, so a matching liability sits on the other side. See security deposit accounting.

Tenant prepaid rent is rent received for months that have not started (see prepaid rent and tenant credits). Accounts payable is bills received but not yet paid. The mortgage is the loan balance, not the monthly payment: only the interest part of each payment passes through the P&L, and the principal part reduces this balance.

Equity: what is left for the owner

Equity is assets minus liabilities. It is built from money the owner put in (contributions), money taken out (distributions or draws), and profit kept in the company (retained earnings). In the example, $250,000 - $80,000 + $61,650 = $231,650. Owner money in and out never goes through the P&L; it only moves equity.

Equity is not what the building would sell for. It uses cost less depreciation, so it can differ a lot from market value in either direction.

When you will be asked for it

Lenders usually ask for a balance sheet with a loan application or refinance, along with the P&L and rent roll. Buyers ask for it in due diligence. Your tax preparer uses it to confirm the loan balance, the depreciation taken so far and the owner's contributions and distributions. Having it ready at every month end means none of those requests turns into a scramble.

Compare each year-end sheet with the last. Accumulated depreciation should rise by that year's depreciation, the mortgage should fall by the principal you paid, and cash should move for reasons you can explain from the P&L and your distributions.

Four checks that prove the sheet

Each bank account balance on the sheet matches that account's statement at the same date.
The deposit bank account equals Security deposits held. In the example both are $9,600.
Mortgage payable matches the lender's statement for that date.
Assets equal liabilities plus equity. If not, an entry was posted on one side only.

The first check is the bank reconciliation, and doing it monthly keeps the rest honest. Ask your tax preparer whether your tax records need any adjustments, since tax depreciation and book figures sometimes differ.

How DoorKeeping handles it

In DoorKeeping, one LLC owns one property, and each property has its own ledger, bank account, deposits held and P&L. Month-end close and card reconciliation are part of the product, and you can ask Claude or ChatGPT how a property stands or see every property together. DoorKeeping does not give tax advice, so your tax preparer still signs off on tax figures.

Sources

IRS, Publication 527, Residential Rental Property (land is not depreciable; 27.5 year recovery period), read Oct 30, 2026

Questions

What is on the balance sheet of a rental LLC?: Assets such as bank accounts, receivables, land, building and improvements less accumulated depreciation; liabilities such as security deposits held, prepaid rent, payables and the mortgage; and the owner's equity.
Are security deposits an asset or a liability?: Both sides show up. The cash in the deposit account is an asset, and the amount you may owe tenants is a liability of the same size.
Why does the building show less than I paid?: Accumulated depreciation is subtracted from the building's cost. Land is not depreciated, so it stays at cost.