Free tools · Trust accounting

Three-way trust reconciliation worksheet

Use this worksheet for the monthly three-way reconciliation of an IOLTA or other client trust account. Enter the bank statement balance, the deposits in transit and outstanding checks, your book balance and each client's ledger balance. It works out the adjusted bank balance, checks whether all three figures tie, and if they do not, tells you which leg is off and where to look. Free, with no sign-up.

Nothing you enter leaves this page. The worksheet runs in your browser, and nothing is sent or saved. Print it or save it as a PDF to keep a record.

Before you start, have these for the same date

  • The trust account's bank statement for the month.
  • The account's balance in your own records (the trust register or checkbook) on the statement date.
  • Every client's trust ledger balance on the statement date.
  • The checks you wrote that have not cleared, and the deposits you made that the statement does not show yet.

Three-way trust reconciliation

Prepared with the free worksheet at modusbill.com/tools

1. The account

2. The bank

$

Deposits in transit

Deposits recorded in your books before the statement date that the statement does not show.

DateDescriptionAmount
Deposits in transit$0.00

Outstanding checks

Checks recorded in your books before the statement date that had not cleared the bank.

Check no.DatePayeeAmount
Outstanding checks$0.00
Adjusted bank balance (statement + deposits in transit − outstanding checks) $0.00

3. The book

$

The trust account's balance in your own records, including entries the bank has not processed yet.

4. The client ledgers

Each client's trust balance on the statement date: one line per client, or per matter where you keep matter ledgers.

Client or matterBalance
Total of client ledgers$0.00

Result

Adjusted bank balance
$0.00
Book balance
$0.00
Client ledgers
$0.00
Bank minus book: $0.00
Book minus client ledgers: $0.00
Enter the statement balance, the book balance and the client ledgers to see whether they tie.
    Prepared by
    Date
    Reviewed by
    Date

    Nothing is saved. Print the worksheet, or save it as a PDF, before you close the page.

    Make the monthly reconciliation the easy part

    In ModusBill the book balance is the sum of the client ledgers by construction, a ledger can never go negative, and every entry is kept with corrections as reversals. The reconciliation screen takes the statement balance and outstanding items, computes the adjusted figure, and stores a printable record each month.

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    Reading the result

    When the bank and the book disagree, the problem sits between the bank and your records: a deposit, check, fee or interest posting one side shows and the other does not, or an outstanding item missing from the lists above.

    When the book and the client ledgers disagree, the problem is inside your own records: money recorded in the trust account without being posted to a client, a client entry that never reached the account, or a ledger left off the list.

    When a client ledger is negative, more was paid out for that client than the firm held for them, even if the totals tie. That is the error a three-way reconciliation exists to catch, and it needs correcting at once.

    A difference that divides evenly by 9 often comes from two digits swapped when a figure was copied. The guide to three-way reconciliation explains each leg and what a completed reconciliation has to show.

    Trust accounting rules are set by each state. This worksheet follows the three-way method most states require; it is not legal or accounting advice. Check your state bar's rules for how often to reconcile, what to keep and for how long.

    Questions

    Many states require a three-way reconciliation of every client trust account each month; the exact rule and the records you must keep vary by state, so check your state bar's rule. Monthly is the safe habit either way: a mistake found a month later is far easier to trace than one found at the end of the year.

    The book balance is what your own records say the trust account holds on the statement date, counting every deposit and check you have recorded. The bank statement lags behind: checks you wrote may not have cleared and deposits you made may not appear yet. The adjusted bank balance is the statement balance plus those deposits in transit, minus those outstanding checks. When nothing is wrong, it equals the book balance.

    A deposit in transit is money you deposited and recorded before the statement date that the bank had not yet credited by then. An outstanding check is a check you wrote and recorded that had not cleared the bank by the statement date. Both are timing differences, and both should disappear on next month's statement; one that lingers for months needs looking into.

    Do not force them. Work through the differences the worksheet shows: an entry posted to the wrong client, a bank fee charged to the trust account, a transposed digit, an item recorded twice or not at all. If you cannot resolve it by the time the reconciliation is due, record it with the difference and a written explanation, and clear it the following month. An honest variance with a note is defensible; a reconciliation adjusted until it agrees is not.

    No. A negative client ledger means more was paid out for that client than the firm held for them, so another client's money covered the difference. It has to be corrected immediately, usually by moving the shortfall in from the firm's operating account, and depending on your state it may also have to be reported.

    No. The worksheet runs in your browser and nothing you type is sent to ModusBill or stored on this site. Print it, or save it as a PDF from the print dialog, before you close the page.

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