Law firm trust accounting · Monthly reconciliation checklist
The monthly trust account reconciliation, step by step.
A law firm’s monthly trust reconciliation proves three numbers agree: the adjusted bank balance, the trust journal balance, and the sum of every client ledger. This checklist sets out what each balance is, the seven month-end steps in order, what to do when the numbers do not agree, what the finished file should hold, and how the required frequency differs from state to state. It describes bookkeeping mechanics, not legal requirements — your state’s rule governs.
A monthly trust account reconciliation is a three-way reconciliation: the trust bank statement’s ending balance, adjusted for deposits and checks not yet posted, must equal the firm’s trust journal balance, and both must equal the sum of every client ledger, all as of the statement date. The month-end work runs in seven steps — gather records, bring the journal current, reconcile the bank, total the client ledgers, compare, trace every difference, then document and sign off. A difference is traced to its cause, never plugged. How often the reconciliation is required is set by each state: sources from California, Washington and Arizona describe monthly, while Illinois’ rule says at least quarterly.
Maintained by TechBrot, an independent bookkeeping and advisory firm — not affiliated with Intuit Inc. Bookkeeping, not legal advice. We keep trust ledgers and perform reconciliations; we never hold, control, sign on, deposit to or disburse from a trust account.
Monthly trust reconciliation, in five questions.
What goes into a law firm’s monthly trust account reconciliation?
Seven steps, in order: gather the month’s trust bank statement and records, bring the trust journal current through the statement date, reconcile the bank account to the journal, total every client ledger as of the same date, compare the three balances, trace and resolve any difference, then document, sign off and retain the result. The output is a three-way reconciliation: adjusted bank balance, trust journal balance and the sum of client ledgers, all equal.
What are the three balances in a three-way reconciliation?
The adjusted bank balance (statement ending balance, plus deposits not yet credited, minus checks and debits not yet posted), the trust journal or book balance (what the firm’s own register says is in the account), and the sum of every client ledger (what the firm owes each client, added up). All three are taken as of the statement ending date.
What should happen when the three balances do not agree?
The difference gets traced to the transaction that caused it and corrected at its source. It is never “plugged” with an adjusting entry to force agreement. A negative client ledger is reported to the attorney the day it is found, because the correction is a decision about client money that only the attorney can make.
How often does a trust account have to be reconciled?
It depends on the state. Sources from the state bars of California, Washington and Arizona describe a monthly reconciliation; Illinois’ rule says at least quarterly. Your state’s own rule governs — confirm it with your state bar or your own counsel.
Does TechBrot hold or move trust money?
No. TechBrot is a bookkeeping and advisory firm. We keep the trust ledgers and perform the monthly reconciliation as a bookkeeping service. We never hold, control, sign on, deposit to or disburse from a trust account; the attorney controls the account and makes every deposit, disbursement and correction.
The three balances, and why all three must agree.
A trust reconciliation is called three-way because it compares three numbers that are kept independently of one another. Each is taken as of the same date: the ending date on the bank statement.
Balance 1 · The adjusted bank balance
Start from the ending balance on the trust account’s bank statement. Add deposits the firm made on or before the statement date that the bank had not yet credited, and subtract checks and electronic debits the firm issued on or before that date that had not yet cleared. The result is what the bank would show if every item the firm has already recorded had posted. Illinois’ rule describes this same adjustment in Rule 1.15A(c)(1).
Balance 2 · The trust journal (book) balance
The running balance of the firm’s own trust register — the receipts and disbursements journal, or the trust bank account’s register in QuickBooks — as of the same statement date. Matching balance 1 to balance 2 is an ordinary bank reconciliation: it proves the firm’s record of the account agrees with the bank’s, and nothing more.
Balance 3 · The sum of all client ledgers
Every client or matter with money in trust has its own ledger showing what the firm holds for that client. Add up every ledger’s balance as of the statement date. This is the number that proves the pooled account is not hiding a problem: the bank and the register can agree with each other while one client’s ledger has gone negative and another client’s money is covering it. Only when balance 3 also matches are the books showing that the account holds exactly what the firm owes its clients, in total and client by client.
The monthly trust reconciliation, step by step.
The seven month-end steps, what to do when the three balances disagree, where the QuickBooks reconcile tool stops, and how four states’ own sources describe the frequency — set out in full below.
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The full checklist, section by section — the three balances, the seven steps, tracing a difference, the file and who signs it, and how often by state.
What goes into a law firm’s monthly trust account reconciliation?
A law firm’s monthly trust reconciliation is a three-way reconciliation, done in seven steps: gather the month’s records, bring the trust journal current, reconcile the bank to the journal, total every client ledger, compare the three balances, trace any difference, then document and sign off. TechBrot does the bookkeeping; the attorney reviews and signs.
The three balances, and why all three must agree
Three balances, all taken as of the bank statement’s ending date. The adjusted bank balance is the statement’s ending balance, plus deposits not yet credited, minus checks and debits not yet cleared; Illinois' Rule 1.15A describes the same adjustment. The trust journal balance is the firm’s own register. The third is the sum of every client ledger. The trust accounting hub explains why all three exist.
Gather the month’s records
Start by gathering the month’s records: the trust bank statement with check images or debit detail, the deposit and disbursement detail, the client ledger report, and last month’s completed reconciliation with its outstanding items. Then bring the trust journal current through the statement date. Every deposit and disbursement dated on or before that date is entered, each one naming its client or matter. Later transactions wait for next month.
Reconcile the bank account to the journal
Next, reconcile the bank account to the journal. Tick each item on the statement against the journal. Items the firm recorded that the bank has not processed yet become the outstanding-deposit and outstanding-disbursement lists. Carry forward last month’s outstanding items and confirm which have now cleared. The adjusted bank balance should equal the journal balance to the cent. How the trust account is structured in QuickBooks is covered on the IOLTA setup page.
Total every client ledger as of the same date
Then total every client ledger as of the statement ending date, not today’s date, and add them up. Scan the list while you add. Any ledger below zero is a finding in its own right, and a ledger with an old balance that never changes is noted for the attorney’s attention. The date matters, because all three balances must be taken as of the same day.
Compare the three balances
Now compare the three balances side by side: the adjusted bank balance, the journal balance and the client-ledger total. If all three are equal, the account is reconciled for the month. If any one differs, the reconciliation is not finished, however small the gap. A bank reconciliation that ties is not enough on its own, because in a pooled account the bank sees one total while a single client’s ledger can be negative.
Trace and resolve every difference
When the balances disagree, trace the difference back to the transaction that caused it, and correct the record at its source. Which balance is out tells you where to look. If the bank and the journal agree but the client ledgers do not, a transaction missed a client ledger or reached the wrong one. If the journal and the ledgers agree but the bank does not, check the outstanding lists first. The recordkeeping errors that make the balances disagree have their own page.
Never plug the difference
Never plug the difference. A plug is an adjusting entry for the exact amount of the gap. On a trust account it hides the transaction that went wrong, carries the error into later months, and produces a report that calls the account reconciled when it is not. The State Bar of California’s reconciliation form says it plainly: if the three balances do not agree, your account is not reconciled. An unexplained difference stays on the report, labelled, until it is found.
A negative client ledger is a finding, not a rounding issue
If one client’s trust ledger is below zero, that client’s matter has been paid with someone else’s money, even when the account total looks healthy. The Washington State Bar Association’s monthly report asks directly whether any client ledger shows a negative balance. TechBrot reports a negative ledger to the attorney as soon as it appears. How it is corrected, and whether anything must be reported, is the attorney’s decision, made with their state bar or their own counsel.
Where the QuickBooks reconcile tool fits
Where does the QuickBooks reconcile tool fit? Intuit’s help article describes reconciling in QuickBooks Online as entering the statement’s ending balance and date, then matching each transaction until the difference is zero, and QuickBooks saves a reconciliation report. Those steps compare one account’s register with its statement: balance one against balance two. Nothing in them adds up client ledgers, so a zero difference is step three, not the finish.
Document, sign off and retain
Finally, document, sign off and retain. Save the report showing all three balances, the outstanding-item lists, the client-ledger listing and the bank statement it was built from, so anyone reviewing it later can rebuild each number. The attorney reviews and signs; the State Bar of California’s form has the attorney certify a personal review and a nondelegable duty. Keep the file for the retention period your state’s rule sets.
How often: each state sets its own answer
How often is set by each state, and there is no single national rule. The State Bar of California’s certification form, the Washington State Bar Association’s report and the State Bar of Arizona’s trust account guide each describe a monthly reconciliation. Illinois' Rule 1.15A requires it at least quarterly. TechBrot reconciles monthly because trust bank statements arrive monthly. Whether that satisfies your rule is a question for your state bar or your own counsel.
Three balances that agree, every month, with the file to show it
TechBrot’s role stops at the records. We never hold or control client money, never sign on the account, never deposit or disburse, never make a correction that moves money, and never interpret a bar rule. Months that were never reconciled can be caught up, oldest month first. Book the discovery call for three balances that agree, every month, with the file to show it. Send this to whoever keeps your firm’s trust books, and subscribe for the rest of the series.
The month-end checklist, in order.
Seven steps, run once the trust bank statement for the month is available. The order matters: each step depends on the one before it, and the reconciliation is not finished until step seven is.
Gather the month’s records
Collect the trust bank statement for the period, with check images or the debit detail; the deposit detail for every receipt; the disbursement detail for every check and electronic transfer; the client ledger report from wherever client ledgers live (QuickBooks or practice-management software); and last month’s completed reconciliation, which carries the prior list of outstanding items.
Bring the trust journal current through the statement date
Every deposit and disbursement dated on or before the statement ending date is entered in the trust journal, and each entry names the client or matter it belongs to. Bank charges or interest that appear on the statement for the first time get recorded too. Transactions dated after the statement date wait for next month.
Reconcile the bank account to the journal
Tick off each item on the statement against the journal. Items the firm recorded that the bank has not yet processed become the outstanding-deposit and outstanding-disbursement lists. Carry forward last month’s outstanding items and confirm which have now cleared. The adjusted bank balance should equal the journal balance to the cent.
Total every client ledger as of the same date
Run the client ledger balances as of the statement ending date — not today’s date — and add them. Scan the list while adding: any ledger below zero is a finding in its own right, and a ledger with an old, unchanging balance is noted for the attorney’s attention.
Compare the three balances
Set the adjusted bank balance, the journal balance and the client-ledger total side by side. If all three are equal, the account is reconciled for the month. If any one differs, the reconciliation is not finished, however small the gap.
Trace and resolve every difference
Work the difference back to the transaction that caused it — a deposit posted to the journal but not to a client ledger, a disbursement charged to the wrong client, a transposed amount, an item missed from last month’s outstanding list. Correct the record at its source. Anything that needs money to move is written up for the attorney, who decides what happens.
Document, sign off and retain
Save the reconciliation report showing all three balances, the outstanding-item lists, the client-ledger listing and the bank statement it was built from. The attorney reviews and signs. File the month’s package where it can be produced on request, for the retention period your state’s rule sets.
Want this done every month?
We keep the trust journal and client ledgers current and prepare the three-way reconciliation each month in your own QuickBooks file, for the attorney to review and sign. Bookkeeping only — you control the trust account.
When the three balances do not agree.
Never plug the difference
A “plug” is an adjusting entry made for the exact amount of the gap so the numbers agree. On a trust account it does real harm: it hides the transaction that went wrong, it moves the error into every later month, and it produces a report that says the account is reconciled when it is not. The State Bar of California’s own reconciliation form tells the preparer that if the three balances do not agree, “your account is not reconciled.” An unexplained difference stays on the report, labelled as unexplained, until it is found. The same logic applies to ordinary books; see why forcing a reconciliation causes damage.
Trace it in a fixed order
Which balance is out tells you where to look. If the bank and the journal agree but the client-ledger total does not, a transaction reached the journal without reaching a client ledger, or reached the wrong one — compare each ledger’s activity for the month to the journal. If the journal and the client ledgers agree but the bank does not, look at the outstanding lists first: an item from a prior month that still has not cleared, a bank charge not yet recorded, or a deposit entered for the wrong amount. The State Bar of Arizona’s trust account guide (revised 2018) gives the same two starting points.
A negative client ledger is a finding, not a rounding issue
If one client’s ledger is below zero, that client’s matter has been paid with someone else’s money, even when the account total looks healthy. The Washington State Bar Association’s monthly reconciliation report asks the question directly: “Do any client ledgers show a negative balance?” We report a negative ledger to the attorney as soon as it appears. How it is corrected — and whether anything must be reported — is the attorney’s decision, with their state bar or their own counsel.
What each month’s reconciliation file holds.
The report and its schedules
One page that shows the three balances side by side and whether they agree, backed by the schedules that produced each number: the bank statement, the outstanding-deposit list, the outstanding-disbursement list, the journal for the month and the client-ledger listing as of the statement date. Anyone reviewing the file later should be able to rebuild each balance from what is in it. If the reconciliation is done in QuickBooks Online, Intuit says the software saves a reconciliation report for the bank side; the client-ledger listing is added alongside it.
Sign-off and retention
The state bar forms cited on this page each end with a lawyer’s certification: California’s says the attorney “personally reviewed” the report and has “a nondelegable duty,” and Washington’s says discrepancies will be resolved “within ten days of this review.” Retention is set state by state. Illinois’ Rule 1.15A(a), for example, says complete records must be preserved for seven years after the representation ends. For any other state, the period is whatever that state’s rule says — confirm it with your state bar or your own counsel.
How often: each state sets its own answer.
There is no single national rule. The ABA Model Rules are a model; they bind no lawyer until a state adopts its own version, and states have written different reconciliation frequencies into their versions. The table below lists four states whose own bar or court source we read on 2026-09-26, and quotes what each source says. It is not a complete list, and it is not legal advice.
| State | Frequency the source states | What that source says | Source |
|---|---|---|---|
| California | Monthly | The State Bar’s Monthly Trust Account Reconciliation and Review Certification is marked “required by Standard (1)(d) in accordance with subdivisions (d)(3) and (e) of Rule 1.15,” and compares the account journal balance, the total of client ledgers and the adjusted bank balance. | State Bar of California form |
| Washington | Monthly | The WSBA’s Monthly Reconciliation and Review Report, issued “pursuant to RPC 1.15A(h)(6),” instructs: “Every month, complete one form for each trust account.” | Washington State Bar Association form |
| Arizona | Monthly | The State Bar of Arizona’s trust account guide (revised May 2018) states that “a 3-way reconciliation must be completed each month,” and points lawyers to Rule 43 of the Arizona Rules of the Supreme Court. | State Bar of Arizona guide |
| Illinois | At least quarterly | Rule 1.15A(b)(7), effective July 1, 2023, requires “three-way reconciliation reports of all client trust accounts on at least a quarterly basis.” Its Comment [2] adds that banks “may allow only 30 days from statement date to notify the bank of errors.” | Ill. Rule 1.15A, Illinois courts |
Reading the table. Four states, two different stated frequencies. Rules change, and a lawyer licensed in more than one state may be subject to more than one of them, so the only reliable answer for your firm is your own state’s current rule — confirm it with your state bar or your own counsel. Our bookkeeping cadence is monthly because trust bank statements arrive monthly; a monthly reconciliation is at least as frequent as every frequency in this table, but whether it satisfies your rule in every other respect is a question for your bar, not your bookkeeper.
Where the QuickBooks reconcile tool fits.
What Intuit says the tool does
Intuit’s help article Reconcile an account in QuickBooks Online describes the process: enter the ending balance and ending date from the account statement, select the checkbox next to each transaction that matches the statement, and continue until the Difference is $0.00. When you finish, QuickBooks saves a reconciliation report you can reopen under History by account.
Why a $0.00 difference is step three, not the finish
The steps Intuit describes compare one account’s register with that account’s statement — balance 1 against balance 2. Nothing in those steps adds up client ledgers, so balance 3 is a separate step whether the client ledgers are kept in QuickBooks or in practice-management software. A trust account can show a $0.00 difference in QuickBooks while a client ledger is negative. For the bank-side mechanics in general, see QuickBooks reconciliation; for how the trust structure is set up in the file, see IOLTA setup in QuickBooks.
Where TechBrot’s role stops.
TechBrot is a bookkeeping and advisory firm. Each month we bring the trust journal current, reconcile the trust bank account, total the client ledgers, prepare the three-way reconciliation report with its schedules, and flag every difference and every negative ledger to the attorney in writing. That is the whole of our role. We never:
- Hold or control client money. We have no custody of, and no control over, any trust account.
- Sign on the account. We are never a signatory and never ask to be one.
- Deposit or disburse. The firm makes every deposit and every disbursement; we record them.
- Decide or make a correction that moves money. We write up what the records show; the attorney decides and acts.
- Certify the reconciliation or the firm’s compliance. The attorney reviews and signs; we do not sign as the certifying lawyer.
- Interpret a bar rule. Rule questions go to your state bar or your own counsel. We say so at the time.
If the months that were never reconciled are the real problem, the work is a catch-up, done oldest month first: see bookkeeping cleanup. For the full trust-accounting picture — ledgers, retainers, transfers — start at the law firm trust accounting page.
Monthly trust reconciliation questions.
Is the QuickBooks reconcile screen a three-way reconciliation?
Can a trust account reconcile to the bank and still be wrong?
What is an adjusted bank balance?
Who signs the monthly trust reconciliation?
What happens if a client ledger shows a negative balance?
Why reconcile monthly if a state rule allows longer?
How long should monthly reconciliations be kept?
What does TechBrot need from the firm each month?
Can you reconcile months that were never done?
Monthly trust reconciliation
Three balances that agree, every month, with the file to show it.
Book a discovery call and we will look at how your trust ledgers are kept today and what a monthly three-way reconciliation would take in your QuickBooks file. We do the bookkeeping; you control the trust account and sign off, and rule questions stay with your state bar or your own counsel.