SETTING UP BANK ACCOUNT FOR EARNEST MONEY

If you're talking about earnest money as in real estate transactions, you may have trust fund compliance issues to consider. You could use subaccounts for each individual name, however.

Here is my general procedure to track escrow funds -

Deposit the collected funds into the Escrow bank account, using a Funds Held in Trust liability account with the customer name in the name field.

Then, write checks for any disbursements of those funds, using the Funds Held in Trust account on the expense tab of that check - with the customer name in the name field on that line.

Then, if applicable, invoice the customer. . .

Then, cut a check from the Escrow bank account to the business, using the Funds Held in Trust account on the expense tab of that check - with the customer name in the name field on that line.

Then, 'Receive payment', using the customer name, and attach that payment to the open invoice.

Then, deposit the funds into the operating checking account, either directly from the payment, or via Undeposited Funds.

I have created a group of memorized reports to show the customer trust activity and balances to use when reconciling/reporting customer balances and/or the bank statement.

_I do not use items, invoices, or sales receipts for any activity directly involving the trust funds. These are two completely separate transactions. . .so much so that some businesses track their trust accounting in a separate QuickBooks file (although I don't see the need for that myself).

Be aware, however, that there is no easy way to link the remaining trust balance on a customer invoice. You can create a custom field and, manually, enter it, but it will not link from one to the other.

Does this help?

_______________________________

Laura D

See my profile at:

http://proadvisor.intuit.com/r...