Paul W. Carlson, CPA:
The best way to understand IOLTA Trust Account Reconciliation requirements is to see an example reconciliation report. This video will walk through the example we use to explain trust account requirements to lawyers. You can download a copy of the example below. It's easier to understand this overview with a printed copy in front of you. Okay, so we've opened the example reconciliation report. The first page of the report is the summary. On this page, we see the bank statement ending balance, the amount of any outstanding items and the reconciled bank statement balance. We also see the general register balance and the customer and admin ledger balance. These last three columns must tie and because we're tying three different values, this is sometimes called a triple reconciliation. The next couple pages of the reconciliation report is a complete copy of the trust account bank statement. So here we have the summary page of the bank statement, and here we have detailed all the transactions that cleared the bank last month.
Along with the statements, we also need to have images of all checks written against the trust account. So I have these little blue boxes to represent the checks that cleared last month, and we also need images of all items deposited into the bank account. The next section of the reconciliation report is the merchant account statement. These can be very difficult to read, but what we're looking for is detail of all credit card transactions that posted to the trust account last month. Just as an example here, we can see that on the same day we had a swipe for $1,900 and a swipe for $2,400, and the merchant account deposited a total of 4,300 to the bank account. We need this report for the detail on this $4,300 deposit. The next page in the reconciliation report is the deposit detail report. We use this report to document aggregate deposits.
So on the merchant account page, we saw that we had two swipes on one day. That deposited a total of $4,300 to the trust account. This report allows us to tie the detailed transactions into the total amount we see on the bank statement. The next page in the reconciliation report is the withdrawal detail report. This report is needed to document, aggregate withdrawals. So an example is we used one EFT transfer to make trust draws against two different client invoices. And so we have this detail. So what happens is the bank statement will show the total withdrawal of 2003, 45. We need this report to document the detail on who those funds belonged to. The next page is the reconciliation detail. This is the same as balancing your checkbook.
This is where we detail the items that cleared the bank account and we detail the items that have not cleared the bank account. The next report is the general register report. This report lists all activity in the trust account from last month. This report will differ from the bank statement because this report lists all activity where the bank statement only lists the items that have cleared the bank. So for an example, we know that this $10,000 payment did not clear the bank last month. And then finally, we have the client and admin ledger report. This is the report that details all activity by client, and it gives us the starting and ending balance for each client. And that's a quick walkthrough of our example IOLTA Trust Account Reconciliation report. A big takeaway from this introduction is to note that a complete IOLTA Reconciliation Report is much more than just the simple client register. That a complete IOLTA reconciliation report is a client register plus additional reports and documents to prove that every balance on the client register is correct.
Again, you can download a copy of the example from the link below. Thank you.