Law firm trust (IOLTA) accounting
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Visit the trust accounting pageLaw 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.
§ TL;DR
A monthly trust account reconciliation is a three-way reconciliation: the adjusted bank balance, the trust journal balance and the sum of every client ledger must agree as of the statement date. It runs in seven steps, and a difference is traced to its cause, never plugged. California, Washington and Arizona sources describe monthly; Illinois’ rule says at least quarterly.
TechBrot is an independent firm — not Intuit, and not Intuit's software support. For your Intuit account, billing, login, or a software bug, contact Intuit directly. This checklist describes the bookkeeping mechanics of a monthly trust reconciliation. Trust-account rules are set by each state’s bar or high court, and they differ; where a rule matters, confirm it with your state bar or your own counsel. TechBrot is a bookkeeping and advisory firm. On its engagements, trust ledgers and reconciliations are kept by TechBrot’s signed trust-accounting specialist practice as a bookkeeping service. Neither TechBrot nor any practice it engages ever holds, controls, signs on, deposits to or disburses from a trust account.
§ 01 · The three balances
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.
§ 02 · In depth
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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§ 03 · The checklist
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.
- 1
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.
- 2
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.
- 3
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.
- 4
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.
- 5
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.
- 6
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.
- 7
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?TechBrot’s signed trust-accounting specialist practice keeps the trust journal and client ledgers current and prepares 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.
Get the free file review
§ 04 · When the numbers disagree
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?” On a TechBrot engagement, a negative ledger is reported 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.
§ 05 · What to keep
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.
§ 06 · How often, by state
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. On TechBrot’s engagements the 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.
§ 07 · In QuickBooks
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.
§ 08 · The boundary
Where TechBrot’s role stops.
On TechBrot’s engagements, TechBrot’s signed trust-accounting specialist practice brings the trust journal current each month, reconciles the trust bank account, totals the client ledgers, prepares the three-way reconciliation report with its schedules, and flags every difference and every negative ledger to the attorney in writing. A Certified QuickBooks ProAdvisor reviews every close a specialist practice prepares before it reaches you. The trust specialist prepares the trust ledgers and the three-way reconciliation; a Certified QuickBooks ProAdvisor reviews the close before it reaches you.
Law-firm trust accounting engagements are backed by a specialist partner practice that has signed with TechBrot for this work, reviewed by a Certified QuickBooks ProAdvisor.
TechBrot is a bookkeeping and advisory firm: keeping the records is the whole of the role. Neither TechBrot nor any practice it engages will ever:
- Hold or control client money. No custody of, and no control over, any trust account.
- Sign on the account. Never a signatory, and never asking to be one.
- Deposit or disburse. The firm makes every deposit and every disbursement; the books record them.
- Decide or make a correction that moves money. What the records show is written up; the attorney decides and acts.
- Certify the reconciliation or the firm’s compliance. The attorney reviews and signs; no one on our side signs as the certifying lawyer.
- Interpret a bar rule. Rule questions go to your state bar or your own counsel, and 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.
§ 10 · Questions
Monthly trust reconciliation questions.
Is the QuickBooks reconcile screen a three-way reconciliation?
Not on its own. By Intuit’s own description, reconciling in QuickBooks Online means matching an account’s transactions to its statement until the Difference is $0.00. That confirms the trust bank account agrees with the firm’s register — two of the three balances. The third, the total of every client ledger, has to be run and compared as a separate step.
Can a trust account reconcile to the bank and still be wrong?
Yes. In a pooled account the bank sees one total. If a disbursement for one client was charged against a client who had no money in trust, that client’s ledger goes negative while the account total stays positive and the bank reconciliation still ties. Only the client-ledger total, compared ledger by ledger, shows it.
Who signs the monthly trust reconciliation?
The attorney. In the California and Washington state bar forms cited on this page, a preparer may fill in the report, but the lawyer certifies having personally reviewed it. On a TechBrot engagement the reconciliation is prepared by TechBrot’s signed trust-accounting specialist practice, and the attorney reviews and signs it; neither TechBrot nor the practice ever signs as the certifying lawyer.
What happens if a client ledger shows a negative balance?
On a TechBrot engagement it is reported to the attorney as soon as it appears, with the transactions that produced it. A negative client ledger means another client’s money covered that matter. How it is corrected, and whether it has to be reported to anyone, is the attorney’s decision, made with their state bar or their own counsel. The books record whatever correction the attorney makes, and the next reconciliation shows it.
Why reconcile monthly if a state rule allows longer?
Trust bank statements arrive monthly, so a monthly reconciliation works from a complete statement each time and keeps the list of outstanding items short. Illinois’ own rule, which requires at least quarterly reconciliation, notes in its comment that banks may allow only 30 days from the statement date to report errors. Whether a given frequency satisfies your state’s rule is a question for your state bar or your own counsel.
How long should monthly reconciliations be kept?
As long as your state’s rule requires, and the period is set state by state. One example from a state’s own source: Illinois’ Rule 1.15A says complete trust records must be preserved for seven years after the representation ends. Confirm your own state’s period with your state bar or your own counsel.
What does TechBrot need from the firm each month?
The trust bank statement with check images or debit detail, the deposit and disbursement detail, the client ledger report if client ledgers are kept in practice-management software, and access to the QuickBooks file. We never need signing authority or any ability to move money, and we never ask for it.
Can you reconcile months that were never done?
Yes, as a catch-up engagement: oldest month first, each one carried to a full three-way comparison before the next begins, because every month’s outstanding items feed the following month. Differences and negative ledgers found along the way are written up for the attorney. TechBrot’s signed trust-accounting specialist practice rebuilds the records; the attorney decides on any correction that moves money.
Monthly trust reconciliation