Earnest money needs one continuous record: the original payment, evidence of receipt, the credit on the purchase closing statement, and the bookkeeping entry that clears or reclassifies it. A deposit credited at closing is not a second payment. For a flipping team, this small check prevents the acquisition file from overstating how much cash left the business.
Which documents should match?
Collect the executed purchase agreement and amendments, bank evidence of each deposit, the escrow or title receipt, and the final buyer settlement statement. Add the purchasing entity and your stable property code to the reconciliation sheet. Keep account numbers and wire instructions in the restricted source file, not in a shared summary.
The CFPB Closing Disclosure explainer identifies deposit and cash-to-close fields when that form is used. Investment and business-purpose transactions may use different settlement forms. Follow the actual signed statement rather than forcing every purchase into a consumer mortgage template.
Use three separate columns: cash already paid, credit applied at closing, and cash still required. This makes it possible to prove that the same dollars have not been counted twice.
Worked example: a $7,500 deposit
Illustrative example, not a complete acquisition journal entry. Juniper Renovations buys a property through one entity. The buyer’s share of the purchase and settlement charges, after lender funding and other credits but before earnest money, is $62,000. It previously paid a $7,500 deposit from that entity’s checking account.
| Evidence | Amount | What the reviewer checks |
|---|---|---|
| Original bank debit | $7,500 | Date, recipient and purchasing entity |
| Escrow receipt | $7,500 | Receipt belongs to this purchase |
| Deposit credit on final statement | $7,500 | Credit applies the earlier payment |
| Remaining buyer wire | $54,500 | $62,000 less $7,500 |
| Total buyer cash across both payments | $62,000 | $7,500 plus $54,500 |
The ledger should preserve the first payment and its settlement treatment. It should not show $62,000 of new cash leaving at closing in addition to the deposit. The company’s accounting policy determines the accounts used; this worksheet proves the cash bridge without prescribing tax classification.
What if the numbers do not agree?
Suppose the final statement credits only $5,000 while the bank and escrow receipt show $7,500. The unresolved difference is $2,500. Ask the closing agent for an explanation or corrected statement and keep the original version. Do not reduce the deposit record just to match the document received most recently.
If there were two deposits, list two rows with their own payment dates and receipts. If one came from an owner personally or a different entity, identify that payer and send the funding relationship for review. A common owner does not make two business bank accounts interchangeable.
If the purchase falls through, track the deposit separately until evidence establishes what happened: refund, deduction, transfer to another transaction, or another documented resolution. An abandoned project code is not a reason to delete its payment history.
A compact review sheet
Give the reviewer these fields: property code; purchasing entity; deposit date; amount; payment reference; escrow receipt reference; final statement version; credit applied; remaining difference; person resolving it; and resolution evidence. Use a status such as awaiting receipt, awaiting closing, discrepancy open, or traced through closing.
Before marking the deposit resolved, have someone other than the preparer follow the references without a verbal explanation. They should be able to answer where the money left, who acknowledged it, where it was applied, and whether any balance remains unexplained.
Does the deposit belong in the final project report?
Its role in the purchase must remain traceable, but adding every bank movement to project costs can double-count it. Reconcile the acquisition entry to the final settlement support under the business’s accounting policy. Use the project-folder guide to retain the supporting documents together.
If several purchases are active, maintain one deposit row per transaction in a portfolio schedule and link each row to its property file. DaxCents can discuss this handoff as part of flip-project bookkeeping.
Sources and further reading
Source links provide background. The workflow and illustrative examples above are original educational material.