What do landlords do with the security deposit?

Owners, in particular. Do they typically get interest on it, spend it, or what? I'm just wondering because at my last place when I moved out they told me they had no record of how much I had paid for my security deposit. I provided four year old check copies and insinuated that I might sue them if it wasn't returned in accordance with law. I wasn't gonna ask for interest, talk about choose your battles. They complied, returned it(less $80 for carpet cleaning). Is it typical for owners and property managers to not know how much was paid for a security deposit and to have no record of it? Do they typically mix it with other funds? The place had changed property managers while I was there but I figured the owners would at least have some kind of record but apparently didn't(or they did and were trying to pull something).