Question

What does the "Escrow Accounting Equation" require?

A. The reconciled escrow account balance must equal the contractual liabilities
B. The reconciled escrow account balance must equal the operating account balance
C. The journal balance must equal "zero"
D. The pending ledger balances must equal the bank balance

Answer 1

The Escrow Accounting Equation requires that the reconciled escrow account balance must equal the contractual liabilities.

Step-by-step explanation:

The Escrow Accounting Equation requires that the reconciled escrow account balance must equal the contractual liabilities (Option A). In escrow accounting, funds are held in a separate account to be used for specific purposes, such as paying taxes or insurance. The escrow account balance needs to match the amount owed for these contractual obligations to ensure proper financial management.