Final answer:
The escrow deposit for taxes and insurance made by the buyer at closing is recorded as a debit to the buyer on the settlement statement. No credit is given to the seller since the seller does not contribute to the buyer's escrow account.
Step-by-step explanation:
When establishing an escrow account for taxes and insurance as part of a home purchase, the amount deposited by the buyer is recorded on the settlement statement. Since an escrow is used to set aside funds for future bills such as home insurance and property taxes, and these funds are provided by the buyer for future payments, the entry would be considered a debit to the buyer. This is because the escrow represents an immediate outflow of cash for the buyer, reducing their balance, but it does not affect the seller's balance since the seller does not contribute to this escrow account. Therefore, no credit is posted to the seller in this situation. The final settlement statement will show this action as a reduction in the buyer's funds.
D. a debit to the buyer. The escrow deposit is a payment towards future obligations of the buyer, so it is recorded as a debit, indicating a reduction in the purchaser's funds at closing. There is no corresponding credit to the seller as this escrow is not a transaction between the buyer and seller but rather between the buyer and the escrow account.