How to Reconcile a Trust Bank Account

Owned by Karen McDonald
Last updated: Aug 23, 2022 by Gemma Heidemann
6 min read

Trust accounts must be reconciled to the last day of the calendar month, every month, within 14 business days of the last day of the month. 

For larger firms, it may be practical to reconcile more frequently, for example weekly.  

The bank reconciliation process is the way to compare what is in the firm's records to what is in the bank account. 

To reconcile select the trust icon (the red courthouse) from the top menu bar to get to the Trust Register. 

From the Trust Register, select the 'Bank Rec' button.

The 1st trust bank reconciliation screen will appear. From here:

  • Select the correct account to be reconciled

  • Verify the opening balance on Wise Owl Legal agrees with the opening balance on the bank statement

  • Enter the closing date and closing bank balance from the bank statement (as at the end of the month)

  • Select Begin Reconciliation. 

  • NOTE: the external reference may be useful for recording the bank statement number

The bank reconciliation screen displays:

  • all cheques and payments that have not previously been reconciled, on the left hand side

  • all receipts and credits that have not previously been reconciled, on the right hand side

  • any banking and reminder adjustments that are outstanding, on the the bottom right hand side

  • a summary of the cleared transactions, which also highlights the current variance 

From here the user works from a printed bank statements and reconciles what movements have occurred within the trust bank account and what has been recorded in Wise Owl Legal. 

A transaction can be reconciled by clicking the transaction line or by hitting the space bar. 

Transactions can be sorted by date, transaction, ref #, amount and cleared. Using a combination of 'sort by' filters can be most effective in the reconciliation process. 

A transaction has 3 stages:

  1. Uncleared

  2. Ticked (pending reconciliation)

  3. Reconciled (after the reconciliation is finalised) 

Whilst the default 'sort by' is date, sorting by date alone can be problematic as trust cheques are not usually written on the same day as they are presented to the bank. To overcome this it may be useful to 'sort by', Ref # or amount. 

A summary screen is displayed at the bottom of the page, and shows all the amounts cleared. This summary highlights the amount of any variance. 

A useful function is the 'mark all' and 'unmark all' buttons. Please note that these buttons only apply to each specific type of transaction (e.g all payments, receipts or adjustments). Therefore to mark all items on the bank reconciliation, you will need to select 'Mark All' for all three categories. Further, reversals automatically remained ticked off against each other, even if the unmark all button is selected. 

Each month there may be adjustments necessary. Select the adjustments button from the top of the bank reconciliation screen. 

If applicable enter the transaction reference number, cheque or receipt number, to not only assist with matching up the adjustment next month, but also for the auditing process.         

 Bank Reconciliation Adjustments

As we don’t live in a perfect world, the bank reconciliation isn’t going to be perfect every time. Therefore it is necessary to create adjustments to ensure the bank’s records balance against the records in Wise Owl Legal.

Wise Owl Legal software has made adjustments easy, by having a pre-existing list of adjustmenst to choose from, spelt out in layman’s terms.

The adjustments have also been prenumbered for your convenience. A list of adjustments, and further explanations, are explained below:

  1. There is money deposisted into my account that I have not yet processed

    1. This is the most common type of adjustment and usually occurs because of the trust accounting regulation that states that trust receipts cannot be backdated

    2. The date is the date the money was physically received by the firm (in the case of direct deposits, this is the date the funds appear on the bank statement)

    3. The description is what the funds are for E.g. professional fees

    4. The Txn Ref  is the receipt number for the transaction, when it has been processed (in the following month)

    5. The matter ref is the matter number the funds relate to

  2. There is an error on my bank statement that the BANK will put BACK INTO my account

    1. A common example is bank charges that are drawn from the trust account, rather than correctly charged against the firm's general account. 

  3. There is an error on my bank statement that the BANK will TAKE OUT of my account

    1. Funds credited to the trust account by the bank in error, although this is not very common 

  4. There is money taken out of my account that the FIRM will PUT BACK

  5. A cheque was presented for LESS than our records

  6. A cheque was presented for MORE than our records

  7. Money deposited was MORE than the receipt we wrote – Firm will receipt

  8. Money deposited was for LESS than the receipt we wrote – Firm will deposit more

  9. Deposit for General was put into trust – bank will correct

  10. Deposit for General was put into trust – we will receipt and process correction

  11. None of the above describes my problem

When in the adjustment screen, this list can be brought up by pressing the down arrow on your keyboard. 

At any point the bank reconciliation can be closed by selecting the 'Back to Trust Register' button. All transactions are saved at this point, allowing the bank reconciliation to be later resumed at its current state.

Be sure to thoroughly check the bank reconciliation report before rolling to the next period. Before finalising the reconciliation  check for:

  • Reversal transactions, ensuring they are checked off against the original entry

  • Stale cheques, cancel and re-issue if necessary

  • Outstanding adjustment for the previous month have been cleared

The 'Complete Reconciliation' button is only available when the bank statement balance is in agreement with the calculated closing balance on Wise Owl Legal. Make sure to run the reports for Trust EOM at this point in time; including the bank reconciliation, the trust trial balance, the cashbook, and the client accounting ledger for trust only. 

Printing an interim bank reconciliation report

An interim bank reconciliation report can be printed by opening up the in progress bank reconciliation, through Trust Accounting > Bank Rec > Continue Bank Reconciliation, then selecting the  browsers print function: either by right clicking and selecting print or selecting print from the top menu bar. 

This report will be displayed with an 'In Progress' watermark.

Printing a final bank reconciliation report

Once a bank reconciliation has been finalised a report can be run through the reports module > trust reports > end of month > trust bank reconciliation. Select the date of the bank reconciliation you wish to print.


Trust End of Month Reports

There are additional reports that need to be printed at the end of the month separate to the Bank Reconciliation.

These can all be accessed by going to the Reports (printer icon) and then choosing the Trust Reports heading.

 

The End of Month Trust reports are all situated handily under the End of Month heading.

Each of these reports needs to be printed by clicking on the report name, entering the dates of the month that was reconciled and clicking View Report.

They can then be downloaded to your computer and printed if you prefer paper.

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