7 Vital Trust Accounting Reports

Trust Accounting

As an attorney, you already know that there is an enormous amount of scrutiny when it comes to the trust accounts you manage. Regardless of what is required by your jurisdiction, there is a set of reports that are vital in showing that your trust accounts are being maintained properly.

In a perfect world you would be able to turn to your banks and ask them to provide you with the necessary trust accounting reports, but unfortunately- these reports can only be created by your law firm’s bookkeeping system. To help ensure that your firm’s trust accounting remains compliant we have compiled a list of 7 trust accounting reports that are nothing short of vital to your firm’s operations.

7 Vital Trust Accounting Reports

Bank Ledger

The bank ledger summarizes all of the activity for the trust bank. All receipts, disbursements, and voids are all included on the bank ledger. Each of these listings includes the Date, Payee/Payer, Amounts, Purpose, running balance and identifies the client matter with which it is associated with.

The bank ledger provides insight into when your firm is going to overdraft, if disbursements are being issued before deposits are made, and what is the actual purpose of each transaction.

Receipts Journal

The receipts journal allows your firm to see any instance where cash has been received from one of your clients. This report is essentially the deposits portion of your bank ledger broken out so that your firm can understand where all deposits are coming from to ensure that they are attributed to the appropriate matter.

Disbursements Book

Consider your firm’s disbursements book the ying to the receipt journal’s yang. While the receipts journal shows your firm when clients have made deposits, the disbursements book is the withdrawal portion of your bank ledger broken out.

Auditors use this report to see if payments are being issued back to your firm. It also provides record of whether or not disbursements are occurring in the appropriate order.

Client Ledger Balances

Considered one of the most critical trust accounting reports, the client ledger balance provides the balances for each of the clients in your books. The client ledger balances report  provides a view into what has cleared and what has yet to be cleared by your bank. This is an essential piece of information because until the checks have been cleared by the bank your firm is still in possession of these funds and still responsible for them.  

Individual Client Trust Ledger

The Individual Client Trust Ledger basically acts as mini bank accounts for each client matter. Each Individual Client Trust Ledger provides a chronological listing of transactions and running balances for each of the clients in your books. This report can be used to ensure that no running balance ever shows a negative balance. If you were to see a negative balance in this report it means that disbursements are being made before receipts.

Bank Reconciliations

If your firm is into proper bookkeeping, you know that bank reconciliations are a critical activity. Typically performed once a month, bank reconciliations compare two balances: the book balance and the adjusted bank balance.

Performing this bank reconciliation is required in most jurisdictions. While it is possible that it isn’t required where you may be practicing law, it is still beneficial in ensuring that your books are in sync with bank activities.

Three Way Reconciliation

In most states, it is required that your administrator performs a 3-Way Reconciliation once every 30 to 60 days. In what may be one of the more scrutinized reports in a legal accounting audit, a three-way reconciliation report displays book balance, adjusted bank balance (including bank cleared transactions and outstanding deposits/payment) and individual balances of all ledgers. The total balance of all three sections should be same.

If nothing else, producing a Three Way Reconciliation Report is a sound accounting process but it could also be the difference between your firm surviving or succumbing to a legal accounting audit in states where they are required.

Want To Learn More? Join Our Free Webinar!

If you’d like to learn more about these vital trust accounting reports, please join us for an informational webinar this Thursday, November 17.

The webinar will cover:

  • Seven vital trust account bookkeeping reports — and why they are so important
  • How to generate and validate these trust accounting reports
  • Practical methods for maintaining trust accounting records

You can register for this complimentary webinar here.


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