What is a three-way reconciliation?
Everyone who has balanced a checkbook knows how to perform a two-way reconciliation – you verify that the balance shown on your bank statement, when adjusted for uncleared deposits and withdrawals, matches the balance shown in your books or checkbook.
Once you have performed a two-way the reconciliation on the trust account, however, you have to perform a third reconciliation where you check the client trust ledger balance against both the adjusted bank balance and the book balance to ensure that all three match. If the trust account is a pooled account such as an IOLTA, then you will have multiple client trust ledgers as well as a ledger for bank charges. The total of all of the ledger balances should match the IOLTA’s adjusted bank balance and book balance.
A three-way reconciliation report contains the adjusted bank balance, the book balance, and the client trust ledger balance and shows that all three balances match. The following is a sample of a three-way reconciliation report:
1. Attorney Trust 3-Way Account Reconciliation Rules & Your Practice
2. How to Perform a Three-Way Trust Reconciliation