Reconciling the trust to the bank account By-Law 9 SS 18(8) requires that you reconcile the two records by the 25th of each month relating to all trust

Reconciling the trust to the bank account

By-Law 9 SS 18(8) requires that you reconcile the two records by the 25th of each month relating to all trust funds held at the previous month’s end. You should correct any errors by month end.

Trust receipts & disbursement journals Bank statement

Reconciling the trust to the banks records

In a perfect world, the clients trust ledger will match the balance in the trust’s bank account

TRUST ACCOUNT: Joe Bloggs Deposits Withdrawals BalanceRetainer 5,000.00 5,000.00 Paid invoice 123 3,000.00 2,000.00 Paid invoice 127 1,000.00 1,000.00

TRUST ACCOUNT: Mary Jones Deposits Withdrawals BalanceRetainer 8,000.00 8,000.00 Paid invoice 254 4,000.00 4,000.00 Paid invoice 293 2,000.00 2,000.00

TRUST ACCOUNT: James Kushner Deposits Withdrawals BalanceRetainer 10,000.00 10,000.00 Paid invoice 254 8,000.00 2,000.00 Paid invoice 293 2,000.00 0 Paid retainer 5,000.00 5,000.00

Total trust balance 8,000.00 Date Details Withdrawals Deposits BalanceMarch 1 2008 Opening Balance 0.00March 3 Deposit 5,000.00 5,000.00 March 7 Deposit 8,000.00 13,000.00 March 8 Withdrawal 4,000.00 9,000.00 March 8 Withdrawal 3,000.00 6,000.00 March 10 Withdrawal 1,000.00 5,000.00 March 12 Withdrawal 2,000.00 3,000.00 March 15 Transfer 10,000.00 13,000.00 March 18 Transfer 8,000.00 5,000.00 March 20 Withdrawal 2,000.00 3,000.00 March 22 Deposit 5,000.00 8,000.00

THE ROYAL BANKBank Statement – Trust Account

March 1 – March 31 2008

Notice that there is a check mark matching each entry

• The timing between the dates when a transaction was recorded on the trust records versus when they appear on the banks records

• There could be a mistake in either one of these records• This process of finding the differences is called a bank

reconciliation

We will work through an exercise one step at a time

Reconciling the trust to the banks records

There are usually differences between these documents for various reasons including:

Total receipts less total disbursements should be the same as the bank statement

Compare the totals of the two documents on page 2

Date Funds

Received Method of Payment Client Amount

August 2 Bob Smith Cheque # 1872 Bob Smith 20,000.00 August 3 Jack Rifner Cheque # 1234 Jack Rifner 15,000.00 August 9 Bob Smith Cheque # 9284 Bob Smith 7,000.00 August 15 Penny Bentor Cheque # 357 Penny Bentor 22,000.00

Julia AvocarTRUST RECEIPTS JOURNAL

Date Paid To Method / Ref # Client AmountAugust 7 Julia Avocar Transfer inv # 254 - cheque # 10 Bob Smith 18,000.00 August 8 Julia Avocar Transfer inv # 255 - cheque # 11 Jack Rifner 8,000.00 August 10 Julia Avocar Transfer inv # 256 - cheque # 12 Jack Rifner 1,000.00 August 15 Julia Avocar Transfer inv # 257 - cheque # 13 Bob Smith 2,000.00 August 17 Julia Avocar Transfer inv # 258 - cheque # 14 Penny Bentor 12,000.00 August 19 Julia Avocar Transfer inv # 258 - cheque # 15 Penny Bentor 7,000.00

TRUST DISBURSEMENTS JOURNALJulia Avocar

Date Details Withdrawals Deposits BalanceAugust 1 Opening Balance 0.00August 2 Deposit 20,000.00 20,000.00August 3 Deposit 15,000.00 35,000.00August 7 Cheque # 10 18,000.00 17,000.00August 8 Cheque # 11 8,000.00 9,000.00August 9 Deposit 7,000.00 16,000.00August 15 Deposit 22,000.00 38,000.00August 22 Cheque # 16 3,000.00 35,000.00August 25 Interest earned 100.00 35,100.00August 25 Bank charges 50.00 35,050.00

Total 29,050.00 64,100.00


August 1 – August 31 2008

Use this chart to enter the totals of each account.

Balance as per trust record:

Total deposits into the trust 64,000.00

Total disbursements from the trust 48,000.00

Balance as per trust record 16,000.00

Adjustments to the trust records:

Deduct unrecorded cheque #16 -3,000.00

Adjusted balance as per trust record 13,000.00

Balance as per bank statement 35,050.00

Adjustments to the bank statement:

Cheque #12 not cleared through the bank account -1,000.00




Interest earned to be deducted from the bank -100.00

Bank charges to be added back to the bank 50.00

Adjusted balance as per bank statement 13,000.00

Bank and Trust Reconciliation

• add all the deposits

• deduct the disbursements

• calculate the balance as per the trust records

Cash balance as per the trust records

Balance as per trust recordTotal deposits into the trust 64,000.00 Total disbursements from the trust 48,000.00 Balance as per trust record 16,000.00

Bank and trust reconciliation

Calculating the differences

Compare all the transactions in the receipts and disbursements journals and the bank statement by checking them off as they are matched.

Example

Date Funds

Received Method of Payment Client Amount

August 2 Bob Smith Cheque # 1872 Bob Smith 20,000.00 August 3 Jack Rifner Cheque # 1234 Jack Rifner 15,000.00 August 9 Bob Smith Cheque # 9284 Bob Smith 7,000.00 August 15 Penny Bentor Cheque # 357 Penny Bentor 22,000.00

Julia AvocarTRUST RECEIPTS JOURNAL

Date Details Withdrawals Deposits BalanceAugust 1 Opening Balance 0.00August 2 Deposit 20,000.00 20,000.00August 3 Deposit 15,000.00 35,000.00August 7 Cheque # 10 18,000.00 17,000.00August 8 Cheque # 11 8,000.00 9,000.00August 9 Deposit 7,000.00 16,000.00August 15 Deposit 22,000.00 38,000.00August 22 Cheque # 16 3,000.00 35,000.00August 25 Interest earned 100.00 35,100.00August 25 Bank charges 50.00 35,050.00

Total 29,050.00 64,100.00


August 1 – August 31 2008

Balance as per trust recordTotal deposits into the trust 64,000.00 Total disbursements from the trust 48,000.00 Balance as per trust record 16,000.00 Adjustments to the trust recordsDeduct unrecorded cheque # 16 -3,000.00


Balance as per bank statement 35,050.00Adjustments to the bank statementCheque # 12 not cleared through the bank account (1,000.00) Cheque # 13 not cleared through the bank account (2,000.00) Cheque #14 not cleared through the bank account (12,000.00) Cheque #15 not cleared through the bank account (7,000.00) Interest earned to be deducted from the bank (100.00) Bank charges to be added back to the bank 50.00


If a cheque has been recorded in the trust records but does not appear in the bank statement, it means that the cheque has not been presented to the bank. These amounts need to be deducted from the bank statement.




Balance as per bank statement 35,050.00Adjustments to the bank statementCheque # 12 not cleared through the bank account (1,000.00) Cheque # 13 not cleared through the bank account (2,000.00) Cheque # 14 not cleared through the bank account (12,000.00) Cheque # 15 not cleared through the bank account (7,000.00) Interest earned to be deducted from the bank (100.00)


If a cheque has been recorded in the trust records as paid but does not appear on the bank statement, it means that the cheque has not been presented to the bank. These amounts need to be deducted from the bank statement.






If a cheque appears on the bank statement but not in the disbursements journal, it means that it was not recorded in the disbursements journal. This amount must be deducted from disbursements journal because it should have reflected a lesser amount.


Recording the differences





This amount must be deducted from disbursements journal because it should have reflected a lesser amount.

Recording the interest earned





If the bank deposited interest into the bank account, it needs to be deducted from the bank balance because it should not have been deposited in the first place. The bank needs to be notified that the amount should be reversed and given to the Law Foundation.




Balance as per bank statement 35,050.00Adjustments to the bank statementCheque # 12 not cleared through the bank account (1,000.00) Cheque # 13 not cleared through the bank account (2,000.00) Cheque #14 not cleared through the bank account (12,000.00) Cheque #15 not cleared through the bank account (7,000.00) Interest earned to be deducted from the bank (100.00)

Bank and trust reconciliationIf the bank deposited interest into the bank account, it needs to be deducted from the bank balance because it should not have been deposited in the first place. The bank needs to be notified that the amount should be reversed and given to the Law Foundation.






If bank charges appear on the bank statement, the amount needs to be added back to the total because it should not have been deducted to start with.






If bank charges appear on the bank statement, the amount needs to be added back to the total because it should not have been deducted to start with. The bank needs to be notified that the amount should be reversed and billed to the general account.

Adding it all up




Adjusted balance as per bank statement 13,000.00


Documents

Reconciling the trust to the bank account By-Law 9 SS 18(8) requires that you reconcile the two records by the 25th of each month relating to all trust