Three way reconciliation template for IOLTA and trust accounts

A three-way reconciliation checks that three numbers agree on the statement date: the adjusted bank balance, the trust book balance and the total of the client ledgers.

• Adjusted bank = bank statement ending balance + deposits in transit - outstanding checks
• Book = the trust journal or check register balance on the statement date
• Client ledgers = the sum of every client’s trust balance on the same date

Example: a statement shows 48,215.40. Add a 2,500 deposit in transit and subtract 1,550 of uncashed checks: the adjusted bank is 49,165.40. The book says 49,165.40, but the positive client balances add up to 49,235.40. The 70 gap is a client ledger that went negative.

Reconcile the bank statement to the book first, then the book to the client ledgers, all as of the statement’s last day.

1. Take the ending balance from the trust bank statement.
2. List deposits in transit and checks that have not cleared.
3. Take the trust journal balance on the same date.
4. Run a client balance list for the same date and add it up.
5. Fix every difference, then sign and file the page.

California’s Rule 1.15 standards list “each monthly reconciliation (balancing)” of the client ledgers, the account journal and the bank statements among the records a lawyer keeps. Rules vary by state bar, so check yours.

The same three balances are compared, with owner ledgers or tenant deposits in place of client ledgers.

Oregon’s Real Estate Agency lists the parts as the bank balance adjusted for outstanding checks and deposits, the receipts and disbursements record on the statement date, and “the sum of all positive owners’ ledgers.” For a security deposit account, the third number is the sum of the positive individual deposit and fee balances.

Example: a deposit account holds 36,400 at the bank and in the register, and the tenant deposits add up to 36,400. All three agree. Switch the tool to property management and the labels follow.

Three formulas do it: one for the adjusted bank, one for the ledger total and one for each gap.

• Adjusted bank: =B2+SUM(D:D)-SUM(F:F) (statement balance, deposits in transit, outstanding checks)
• Ledger total: =SUMIF(J:J,">0") (positive client balances only)
• Gap: =ROUND(B4-B5,2) for bank vs book, and the same for each other pair

In Clio Manage, the trust listing report gives each client’s balance and last activity date, ready to paste in. The tool above does the same math and adds the flags and the printable page.

Start with the pair that is off, then test the gap against the usual causes.

• The gap equals one outstanding item: it cleared, or it was never listed.
• Half the gap equals one entry: it was posted on the wrong side.
• The gap divides evenly by 9: two digits were swapped when typed.
• Bank and book agree but the ledgers are off: look for a negative client balance or money posted to the wrong client.

Example: a gap of 450 divides evenly by 9, and 1,160 typed as 1,610 makes exactly that gap. The tool runs these tests for you.