Where does a security deposit actually live when several units share one operating account

Take a small multifamily property, say six or nine units, where deposits were collected over several years as tenants signed leases. A common pattern is that each deposit lands in the operating account and gets treated as cash rather than as a liability. Nothing goes missing in the sense of theft. The account balance still covers everything. But there is often no line anywhere that states the owner owes tenants a specific dollar figure held in trust, and a spreadsheet that books deposits alongside rent income will overstate income for as long as that habit continues. A state deadline for returning a deposit is usually the moment this surfaces, when an owner tries to work out how much is actually being held across every unit and finds the number is not approximable from the records as kept. The fix is methodical rather than clever. A bookkeeper coming in fresh should start with the lease file, not the bank statements: read every lease, pull the stated deposit amount from each one, and match it back to the actual bank deposit. Mismatches show up this way, and an odd deposit amount on a lease, say a pet deposit with no corresponding record, is exactly the kind of discrepancy this method catches. How deposits must be held, whether a separate account is required, whether interest is owed, is governed by state law and the requirements vary more than owners tend to assume. That is a question worth putting in front of an attorney rather than guessing at.