Should I expense tax and insurance escrow payments monthly?

[Ben Bakhshi]

This is a bookkeeping question.

Every month we make a mortgage payment which includes: Principal, Interest, and Tax & Insurance.

I split the payment in Quickbooks Online, so every month our mortgage goes down, plus we have an interest expense on our books.

As for the Tax and Insurance, the money goes into escrow with our bank.

Initially I had created a current asset accounts in order to represent the escrow.

But that means that our income statement will not reflect these expenses until those are paid.

I am leaning towards expensing them every month, and then readjusting them in case the number is different. This will help us see better our P&L on a monthly basis.

Thoughts?

[Brandon Hall]

@Nick Baldo your CPA is correct here.

@Ben Bakhshi you don't record the monthly deposit into escrow because it's not a real expense and you are likely a cash based accounting business. When using cash based accounting, you record the expense when it's actually incurred. As long as the funds are sitting in an escrow account, the money is still yours as the expense hasn't yet occurred.

You can certainly record the expenses each month but it can be overkill for a cash based accounting business and it won't accurately reflect your books. 

Hope this helps.