What happens to tuition deposits when a daycare is sold?

Short answer

Do not treat the cash balance as automatically earned revenue. Build a child-level liability schedule tied to agreements and billing records. Match the seller's last service date and the buyer's first service date, then fund whichever party must honor future care, credits, or refunds.

Key Takeaways

• Labels do not determine whether a balance is earned, refundable, or restricted.
• Reconcile every family amount to agreements, billing, attendance, and cash.
• Match transferred obligations with funding and buyer authority to provide care.
• Align deposit schedules with working capital and purchase-price adjustments.

Longer answer

Centers use different labels: registration fee, security deposit, last-week tuition, prepaid tuition, family credit, scholarship balance, activity fee, or reservation payment. The label does not determine the obligation. Read the enrollment agreement, refund policy, applicable law, ledger, invoice history, and communications.

Reconcile billing to attendance and bank deposits. Identify the payer, child, amount, date, stated purpose, refundability, service period, restrictions, disputes, chargebacks, and current balance. Separate public-program receivables and grants from family deposits; they follow different rules and approval paths.

The purchase agreement should state the cutoff for tuition earned by the seller, tuition earned by the buyer, accounts receivable, credits, refunds, and collection after closing. It should also address errors discovered later, family withdrawals around the cutoff, and access to supporting records.

What it depends on

Amount	Evidence	Closing treatment to define
Security/reservation deposit	Agreement and family ledger	Transfer, refund, credit or exclusion
Prepaid future care	Service dates, attendance and billing	Cash funding with service duty
Family credit	Credit memo and payment history	Buyer assumption or seller refund
Accounts receivable	Invoice, aging and collection rights	Retained or purchased receivable
Scholarship/restricted funds	Award terms and balance	Consent, restriction or repayment
Disputed/charged-back amount	Correspondence and processor record	Escrow, reserve or responsibility

Working-capital definitions must agree with the liability schedule. If the seller keeps cash but the buyer must provide future care, the buyer may begin with an unfunded obligation. If both price and working capital account for the same deposit, it may be counted twice.

Example

A family prepaid four weeks, two before and two after the anticipated closing. The parties verify the contract, payment, attendance, and refund terms. The closing schedule allocates the first two weeks to the seller and funds the buyer for the two weeks of care it must provide, subject to final attendance and any lawful family election.

That example illustrates reconciliation only. Actual treatment depends on the agreement, state law, transaction documents, accounting method, and whether the buyer is authorized to serve the family.

What to do next

Export a family ledger as of a defined date and reconcile it to the general ledger and bank. Classify every balance, obtain counsel and accounting review, and update the schedule immediately before closing. Draft a family communication that accurately explains continuity, credits, refunds, payment methods, and whom to contact.

Use the deposit liability guide, seller deposit guide, working-capital guide, purchase agreement guide, tuition verification guide, and closing timeline guide.

Related

The closing schedule should let any reviewer trace each family balance from source cash to the party responsible for future service or refund.