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Law Institute of Victoria – Trust Accounting Blog - Trust Account Reconciliation

Law Institute of Victoria – Trust Accounting Blog - Trust Account Reconciliation

By Law Institute of Victoria

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Trust Account Reconciliation

The trust bank account reconciliation is an important tool in maintaining accurate and compliant trust records. It should be understood by the practitioner and especially any reconciling items. The items explained below will give the practitioner an insight into what is involved in the reconciliation, providing a better understanding of the process.

Trust Cash Books

1. The trust receipts and payments cash books are printed monthly. The transaction on these reports are checked to bank statements – any unchecked items on each record will be reconciling items for the relevant month as follows:

  • Unchecked items on the trust receipts cash book will be outstanding deposits in the monthly reconciliation,
     
  • Unchecked items on the trust payments cash book will be unpresented cheques in the monthly reconciliation.


Trust Bank Statements

2. The unchecked items included on the bank statements after comparison with the trust receipts and payments cash books will also be reconciling items for the relevant month as follows:

  • Unchecked credit items on the bank statements will be: Bank statement credits not in the cash book.
     
  • Unchecked debit items on the bank statements will be: Bank statement debits not in the cash book.


3. Bank statement credits not in the cash book could be deposits or EFT receipts not known but credited to the trust bank account. These transactions should be recorded in the trust receipts when details of the receipts are determined (this could be in the next month). These should be treated as a minus adjustment on the reconciliation because they will be included in the trust bank account balance but not the cash book balance. It is preferable to treat these transactions as reconciliation adjustments rather than record a trust receipt and allocate it to “Unidentified Deposits”.


4. Bank statement debits not in the cash book could be bank charges debited to the bank statement (in error), EFT payments inadvertently omitted from the trust payments. These will either be reversed by the bank (for charges) or included in the next month’s trust payments (for omitted EFT payments). These should be treated as a plus adjustment on the reconciliation because they will be included in the trust bank account balance but not the cash book balance.


Reconciliation Adjustments

5. The plus and minus adjustments should only appear in one reconciliation. Receipts not recorded in trust receipts should be automatically adjusted when they are recorded in trust receipts in the next month. Debit bank charges should be adjusted by the bank and no action taken on these charges. Unrecorded EFT payments should be automatically adjusted when they are recorded in trust payments the next month.


This article was contributed by Peter Dosser. Peter provides accounting support to users of LIV’s Trust Accounting Online Software. If you would like to learn more about subscribing to LIV’s Trust Accounting Online Software, visit https://ta.liv.asn.au, email tahelp@liv.asn.au or call 03 9607 9463.


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