Maintaining proper trust accounting records is crucial in order to ensure accurate bookkeeping, provide an audit trail, and clearly establish proper trust account handling to maintain compliance. Also known as IOLTA accounting, managing these specialized client accounts requires diligent reporting.
Each state varies in its specific report requirements, but the following are a list of trust account reports that are considered to be part of best practices:
This is the combination of both the receipt and disbursements journals, which includes every transaction identified by date, client matter, amount, and purpose.
Client Ledger Balance
This report shows the overall balance for any client trust accounts, as well as any cleared and uncleared transactions.
A record of all of the disbursements, or outgoing funds, for a bank account, identified by date, matter, purpose, and amount.
Individual Client Trust Ledgers
These individual ledgers show the transactions for each client matter. As these funds are typically pooled into one larger IOLTA account, these individual ledgers ensure there are no overdrafts of a single matter account and track associated costs and deposits.
A record of all of the deposits for a bank account, identified by date, matter, purpose and amount.
This report should be run monthly and compares the balances of the bank statement, the sum of the individual client ledgers and the client ledger balance. If all three are equal, this means the transactions have been entered correctly and the books are accurate.
Whether you run these reports manually or through a software program designed to handle legal-specific accounting, these should be part of your trust accounting management process.