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Escrow Bond: What is it and how is it accounted for?

Please help with the following business law-related posting.

Can someone help me understand escrow bond addition? For example, if I see an invoice from Aon Risk services posted to prepaid legal account, what is that for?

Please provide at least 300 words.

Solution Preview

An escrow bond is a type of surety bond which is purchased to insure that a party to a contract complies with the terms of the contract.

Example: you have signed a contract for the purchase of an exercise club. Your deal won't close for 30 days but you are entitled to prepayments made by customers. Some customers pay 3 months in advance in order to receive a discount, and others pay 1 month in advance. As the buyer, you will be entitled to a large portion of those funds. Your ...

Solution Summary

The following posting explains the concept of an escrow bond and speculates about the purposes of it as part of a law firm. There are also several well-explained situations where an escrow bond would be appropriately used. The explanation is given in 349 words.

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