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mgspoden
February 19, 2025
Question

Escrow payments made by bank not noted for previous years

  • February 19, 2025
  • 2 replies
  • 0 views

When noting payments made on a mortgage, the portion that was meant toward the escrow was noted.  Unfortunately, it made it appear that the amount owing to escrow, because it was a subitem of the mortgage, was decreasing the amount of the total mortgage.  Now in QB, it shows that I owe much less for my mortgage than I actually due because it didn't account for the part to escrow was paid out by the bank and not going toward the greater mortgage amount.  Should the escrow be a separate line item instead of a subitem?  Can I do a general journal entry for past years to amend the amount that should still be owing on the mortgage?

2 replies

G
GilbertFox33
February 21, 2025

You should separate escrow from the mortgage to avoid incorrect balance reductions. Create an Other Current Asset account for escrow instead of making it a sub-account of the mortgage. When recording mortgage payments, split the principal and interest to the mortgage liability account, and escrow to the escrow account.

 

To fix past years, use a General Journal Entry (GJE). Debit the mortgage liability account to restore the correct loan balance. Credit the escrow account (or another appropriate account) to adjust the funds.

 

Use correct historical dates for accuracy. If this impacts tax reports, consult an accountant. Going forward, always split payments properly to keep records accurate.

Rainflurry
Rainflurry
February 21, 2025

@mgspoden 

 

Is your mortgage loan payable understated by the amount of the escrow sub-account?  If so, the correct journal entry is a debit (increase) to your escrow other current asset (OCA) account and a credit (increase) to the escrow sub-account for the balance in the sub-account.  That will reclassify the amount in the sub-account to the escrow OCA and increase the balance of the mortgage loan payable.  When you make an entry to the sub-account, the parent account will increase.  You don't need to make a separate entry to the parent account.  

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