AccuraBooks Construction Escrow Disbursed Funds Accrued
This article continues the series of blogs regarding Construction Escrow Accounts.
As per the most recent blog about this topic, I will be discussing one popular way in which a Construction Escrow account can be accounting for in your bookkeeping.
As stated previously, Construction Escrow funds are disbursed (drawn) only upon request, like a Line of Credit or perhaps a Flexible Spending account.
However, you should also maintain the balance reconciliations of this account in your books, like you do a bank or loan account. This requires that the Construction Escrow company (the lender) divulges your ongoing escrow financial activities to you in the form some sort of detailed statement (like a bank or credit card statement). These lenders typically will (either upon special request or online access) display this detailed information to you, but the overall (and ongoing) balance information given can be confusing. Sometimes this balance given is either:
- Total escrow funds disbursed (total draws by you), or,
- Remaining escrow funds available.
In this blog, let us discuss only the first scenario above, total funds disbursed (drawn).
So, here is a bookkeeping (Chart of Accounts) example of this scenario:
Please Note: The loan payable is $9,458,431.88. This was posted as a credit to liabilities and debit to (as you can see here) “Original Escrow Loan.” This is because no cash was given, but instead a promise to disburse funds as a later date.
The “Draws” sub-account is the total draws (disbursements) to date.
As you might have figured out, “Construction Loan Escrow,” the parent account, is actually the funds remaining. So, you really get the best of all worlds here.
Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.