Three-Way Trust Account Reconciliation Checker
Prove that your bank balance, your trust ledger, and the sum of every client ledger are the same number. Enter the three figures, see the variance, and copy a signed reconciliation report.
3 legs
bank, ledger, client balances
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Your figures
Take these straight from the bank statement, your trust ledger, and the client ledger report for the same closing date. Nothing you type leaves your browser.
Leg 1: the bank
Leg 2: your books
Leg 3: individual client ledgers
One line per client or matter holding funds, plus any firm money you keep in the account for bank charges where your state allows it.
Your reconciliation
All three figures have to be identical. Anything else is an open item, however small.
All three balances agree
$49,500.00
reconciled trust balance
How the bank leg is built
- Ending balance per statement
- $48,250.00
- Plus deposits in transit
- $5,000.00
- Plus other credits
- $0.00
- Less outstanding checks
- -$3,750.00
- Less other deductions
- $0.00
- Adjusted bank balance
- $49,500.00
Note
All three balances agree
Sign and date the report, have the responsible lawyer review it, and keep it with the statement, the ledger printouts, and the list of outstanding items. Retention periods are set by your state and commonly run five to seven years.
Copy-ready reconciliation report
This tool performs arithmetic on figures you supply and runs entirely in your browser. Nothing is transmitted, saved, or shared. It is not legal, accounting, or tax advice, and it does not replace the reconciliation your own jurisdiction requires. Reconciliation frequency, required records, retention periods, and review and signature duties are set by your state, and the responsible lawyer remains accountable for the account.
A bank reconciliation is not a trust reconciliation
Plenty of firms reconcile the trust account every month and would still fail an audit. They compare the bank statement to the check register, the two agree, and the file gets closed. That is a two-way reconciliation, and it proves only that the firm and the bank agree about how much money is in the account. It says nothing about whose money it is.
The third leg is the one that matters. If you total every individual client ledger and that number does not equal the reconciled bank balance, then either you are holding money that belongs to nobody you can name, or you are short money that belongs to somebody who is going to ask for it. Both conditions can exist quietly for months in an account that reconciles perfectly against the bank, because the account balance stays right while the ownership underneath it goes wrong.
North Carolina writes the test into the rule text: a reconciliation report must show that the general ledger balance, the total of all subsidiary client ledger balances, and the adjusted bank balance are identical. Florida describes the same exercise as a monthly reconciliation followed by a monthly comparison of ledger card totals to the reconciled bank balance, and says plainly that a difference means either a shortage or unidentified funds. The tool above runs that arithmetic, flags the specific conditions examiners look for, and gives you a report you can sign.
How to run the reconciliation, step by step
The order matters more than most people expect. Done in this sequence, a clean month takes about twenty minutes and a bad month gives you the evidence you need to find the problem instead of just knowing one exists.
1Freeze one date and use it everywhere
Pick the bank statement closing date and pull all three sources as of that exact date. The single most common reason a reconciliation refuses to tie is that the client ledger report was run today and the statement closed on the last day of the month, so a week of new activity sits in one figure and not the others.
2Start from the statement, not from your books
Take the ending balance exactly as printed. Do not adjust it, do not use the available balance, and do not use an online balance pulled at a different moment. The statement is the only figure in the exercise that a third party produced.
3List outstanding items individually before you total them
Write out every outstanding check by number, payee, date, and amount, and every deposit in transit by date and amount. A single total hides the fourteen-month-old check that should have been investigated two quarters ago, and the list is what you will need if the reconciliation does not tie.
4Compute the adjusted bank balance
Statement balance, plus deposits in transit and any other credit that has not posted, minus outstanding checks and any other deduction that has not posted. This is the formula North Carolina writes into its rule and the one Florida describes in its trust accounting guidance.
5Take the trust ledger balance without cleaning it up
Use the balance your check register or accounting system actually shows for that account on that date. Resist the temptation to make a correcting entry first. The difference between what your books say and what the bank says is information, and adjusting the books before you measure it destroys the evidence.
6Total every individual client ledger, including zero and negative ones
Run the client ledger report as of the same date and list each matter with a balance, plus any firm money held in the account for bank charges where your state permits it. Look at the zero balance and negative lines specifically. A negative balance never nets out against a positive one, and treating the report total as a single number can hide it.
7Compare all three and investigate any variance, however small
The three figures either match to the penny or they do not. A variance of a few cents is usually a rounding or fee item and it is still an open item until you name it. Work the difference: does it equal a single transaction, half a transaction (which suggests a sign error), or the difference between two similar amounts (which suggests a transposition)? A variance divisible by nine is the classic signature of transposed digits.
8Sign it, have a lawyer review it, and file it with the evidence
The report is the deliverable, not the spreadsheet you got there with. Keep it with the bank statement, the client ledger printouts, and the outstanding items list for that period, and have the responsible lawyer review and sign. North Carolina requires a signed and dated report of each monthly and quarterly review to be retained for six years, and that structure is a reasonable default even where your state does not spell it out.
What each variance usually means
A variance is a symptom, and the symptoms are not interchangeable. Which two figures disagree tells you where to look, which is why the tool reports all three comparisons rather than a single pass or fail.
Adjusted bank is higher than your trust ledger
Something reached the bank that never reached your books. Look first for a deposit you recorded twice, a check you entered but voided at the bank, or an electronic credit such as a wire, a refund, or a returned disbursement that posted without a corresponding entry. Interest credited on a non IOLTA account will do this too. Work from the statement side, tick every line against the register, and the unticked item is your answer.
Your trust ledger is higher than adjusted bank
Money left the account without a matching book entry, or an entry on your side overstates what is really there. The usual suspects are a bank service charge or wire fee debited straight from the trust account, a check that cleared for a different amount than you recorded, an item returned unpaid after you counted the deposit, and a check you listed as outstanding that actually cleared in an earlier period. A bank fee taken from a trust account is its own problem: most rules require the firm to fund charges rather than take them from client money.
Client ledgers total more than the money in the account
This is a shortage, and it is the condition the entire trust accounting apparatus exists to detect. Money you are holding for clients is not there. Common causes are a disbursement made against a deposit that had not yet collected, a settlement check disbursed before the funds cleared, a payment written against the wrong client's balance, and a transfer to the operating account that exceeded what was actually earned. Stop disbursing, find the transaction, and restore the difference from firm funds rather than moving other clients' money to cover it.
The account holds more than the client ledgers explain
Unidentified funds are a reconciliation failure, not a buffer. Look for earned fees that were billed and never transferred out, a deposit posted to the general ledger without opening a client ledger, an old balance for a matter that closed, and interest or a small credit nobody assigned. Firms often find that a stale unidentified balance is really unclaimed client property, which most states route to an escheat or unclaimed funds process rather than to the firm.
One client ledger has gone negative
A negative individual ledger is arithmetically impossible in a properly run account, because you cannot disburse money you never held for that matter. When it appears, the difference was funded by other clients' balances. The total may still tie to the bank, which is exactly why the third leg matters: a two way reconciliation between the bank and the checkbook would show nothing wrong. Trace the disbursement, replace the money from firm funds, and document what happened.
Everything ties but the outstanding items list is stale
A reconciliation that balances only because a check from fourteen months ago is still carried as outstanding is not reconciled. Age the outstanding list every period. Checks that have not cleared after several months usually mean a lost check, a payee who never received it, or a check that was voided at the bank and never voided in your records. Old outstanding checks payable to clients are the most common source of unclaimed property exposure in a law firm.
What the rules actually require, with sources
Trust accounting duties are set state by state, and the differences are not cosmetic. Reconciliation frequency, retention periods, review and signature duties, and annual reporting all vary. The five sources below are quoted from the governing rules and regulator guidance rather than from secondary summaries. They are a starting point for reading your own state’s rule, not a substitute for it.
ABA model standard
ABA Model Rules for Client Trust Account RecordsThe ABA model recordkeeping rules call for records including receipt and disbursement journals, individual client ledgers, and copies of monthly trial balances and quarterly reconciliations of client trust accounts. Quarterly is the model floor rather than the recommended practice, and many jurisdictions that adopted the model rules tightened the interval when they did so.
ABA Model Rules for Client Trust Account Records, Rule 1North Carolina
27 N.C. Admin. Code 2, Rule 1.15-3North Carolina writes the three-way test into the rule itself. A reconciliation report must be prepared at least quarterly for each general trust account and must show that three balances are identical: the general ledger balance, the total of all subsidiary ledger balances found by listing and totaling the positive balances in the individual client ledgers and the administrative ledger, and the adjusted bank balance, determined by adding outstanding deposits and other credits to the ending statement balance and subtracting outstanding checks and other deductions. The rule also requires a monthly reconciliation of the trust account balance on the lawyer's records against the bank statement, a monthly review of the statement and canceled checks, and a quarterly review of a random sample of completed transactions, with a signed and dated report of each review retained for six years.
North Carolina State Bar, Rule 1.15-3Florida
Chapter 5, Rules Regulating The Florida BarFlorida requires monthly reconciliation and a monthly comparison of ledger balances. The bank balance plus outstanding deposits minus outstanding checks must equal the journal balance, and the total of the client ledger cards must then match that reconciled figure. A difference means either a shortage or unidentified funds. Required records include monthly statements, deposit slips, canceled check images, a chronological receipts and disbursements journal, and individual ledger cards with running balances, all retained at least six years. Firms with more than one lawyer must maintain a written trust account plan naming who signs trust checks and who is responsible for reconciliation.
Rules Regulating The Florida Bar, Chapter 5California
Rule of Professional Conduct 1.15 and Rule of Court 9.8.5California added an annual compliance layer on top of the recordkeeping duty. Under the Client Trust Account Protection Program, effective since December 2022, licensees must annually register every client trust account that was open at any point in the reporting period, including IOLTA and non IOLTA accounts, complete a self-assessment of client trust account management practices, and certify that they understand and comply with the safekeeping requirements of rule 1.15. California Rule of Court 9.8.5, effective January 1, 2023, sets out the annual reporting, registration, and self-assessment obligations.
State Bar of California, Client Trust Account Protection ProgramNew York
22 NYCRR 1200.0, Rule 1.15New York specifies the bookkeeping records a lawyer must maintain for seven years after the events they record, including records of all deposits and withdrawals, a record for special accounts showing the source of funds and the persons for whom they are held, retainer and compensation agreements, statements to clients showing disbursement of funds, bills rendered, and all checkbooks, check stubs, bank statements, and prenumbered canceled checks. Those records must be produced in response to a notice or subpoena from a grievance or disciplinary committee. Trust funds must sit at a banking institution that reports dishonored checks and overdrafts under 22 NYCRR Part 1300.
New York Rule 1.15, via Cornell LIIThis page describes published rules and regulator guidance for general information. It is not legal, accounting, or tax advice, and rules change. Confirm the current text of your own jurisdiction’s rule, and if a reconciliation turns up a shortage, get advice before you move money.
Who actually does this in a small firm
In most firms under twenty lawyers, the honest answer is that the reconciliation gets done by whoever has time, which means it gets done late. The work itself is not difficult. It is pulling the statement, listing outstanding items, printing the client ledger report, computing the adjusted balance, chasing the differences, and assembling the file. What makes it slip is that it competes with billable work and there is no client waiting on it, right up until there is.
The preparation is delegable and the responsibility is not. A trained legal billing assistant can own the monthly cycle: reconcile on a fixed date, age the outstanding items, flag negative and stale ledgers, prepare the report, and put it in front of the responsible lawyer for review and signature. That structure also gives you the separation regulators expect, where the person preparing the reconciliation is not the only person looking at it. North Carolina requires the lawyer to sign and retain review reports, and Florida requires multi-lawyer firms to name in writing who signs trust checks and who is responsible for reconciliation.
DocketHire places remote legal support staff with US law firms, including legal billing assistants who run monthly billing and trust accounting support under your supervision, in your software, on your schedule. If you are weighing that against an in-house hire, the trust accounting outsourcing cost guide and the law firm bookkeeping cost guide lay out the numbers. Firms that keep running into the same billing problems month after month often find the root cause in our list of legal billing mistakes to avoid.
Questions firms ask
What is a three-way reconciliation for a law firm trust account?
It is a reconciliation that proves three separate figures are identical for the same closing date. The first is the adjusted bank balance: the ending balance on the statement, plus deposits in transit and other credits, minus outstanding checks and other deductions. The second is the balance in your own trust ledger or check register for that account. The third is the sum of every individual client ledger, matter by matter. An ordinary bank reconciliation compares only the first two. The third leg is what proves that no client's money is being used for another client's disbursement, which is the failure the rules are actually written to catch. North Carolina's Rule 1.15-3 states this directly by requiring that the general ledger balance, the total of the subsidiary client ledger balances, and the adjusted bank balance all be shown to be identical.
How often does a law firm have to reconcile its trust account?
It depends on your jurisdiction, and the range is real. The ABA Model Rules for Client Trust Account Records contemplate monthly trial balances and quarterly reconciliations, which is the model floor. Florida requires monthly reconciliation and a monthly comparison of client ledger totals to the reconciled bank balance. North Carolina requires a monthly reconciliation of the trust account balance against the bank statement and a quarterly three-way reconciliation report, plus monthly and quarterly reviews with signed reports. Most firms that have been through a trust account audit run the full three-way monthly, because finding a single transposed digit inside one month of activity is a short task and finding it inside three months is not.
What does it mean when a client ledger has a negative balance?
It means more money was disbursed on that matter than was ever deposited for it, so the difference came from balances belonging to other clients. It is one of the clearest indicators a trust account auditor looks for, and it can exist while the account still ties to the bank, because the shortfall is covered by other clients' funds. The fix is never to move money between client ledgers. Identify the disbursement that caused it, replace the amount from firm funds, and document the cause and the correction in the reconciliation file.
What if the trust account holds more money than the client ledgers show?
That is unidentified funds, and it is a reconciliation failure in the same way a shortage is. Every dollar in a client trust account has to belong to an identified person or matter. The usual causes are earned fees that were billed but never transferred to the operating account, a deposit recorded in the general ledger without a client ledger being opened, interest or a bank credit nobody assigned, and residual balances on matters that closed. Old residual balances often turn out to be unclaimed client property, which most states handle through an escheat process rather than allowing the firm to absorb them.
Can a nonlawyer bookkeeper or virtual legal billing assistant reconcile the trust account?
The preparation work is routinely delegated, and the responsibility is not. Someone has to pull the statement, list outstanding items, print the client ledger report, compute the adjusted bank balance, chase differences, and assemble the file. That is bookkeeping, and firms delegate it to in-house staff, outside bookkeepers, and remote legal billing assistants every day. What does not move is the lawyer's obligation for the account. North Carolina, for example, requires the lawyer to sign and date the review reports and retain them. Florida requires multi-lawyer firms to keep a written plan naming who signs trust checks and who is responsible for reconciliation. The workable structure is that staff prepare and reconcile, a named lawyer reviews and signs, and the two duties never sit with the same person unsupervised.
What records do we need to keep, and for how long?
Retention periods differ by state, so confirm your own. New York requires the specified bookkeeping records to be maintained for seven years after the events they record. Florida and North Carolina both use six years. The record set is broadly consistent: bank statements and canceled check images, deposit records, a chronological receipts and disbursements journal, an individual ledger for each client or matter with a running balance, the reconciliation reports themselves, and supporting documents such as closing statements and fee agreements. Keep the reconciliation report together with the statement, the ledger printouts, and the outstanding items list for that period, because a reconciliation you cannot reproduce later is not much use in an audit.
Does a trust accounting software package remove the need for this?
It removes the arithmetic, not the reconciliation. Practice management and legal accounting systems will produce a three-way reconciliation report on demand, which is a genuine improvement over spreadsheets. What software cannot do is tell you that a deposit was posted to the wrong matter, that a disbursement went out against uncollected funds, or that a check has been outstanding for a year because it was never delivered. Those are found by a person comparing the report to the underlying documents. The value of running the numbers yourself, at least occasionally, is that you learn what your own account is supposed to look like.
Is this tool a substitute for our accountant or our state bar's requirements?
No. It performs the arithmetic the rules describe and flags the conditions that commonly indicate a problem, and it runs entirely in your browser so no figures are transmitted or stored. It does not know your jurisdiction's reconciliation interval, its retention period, its rules on firm funds held for bank charges, or its reporting obligations when a shortage is found. Nothing here is legal, accounting, or tax advice. Confirm your obligations in your own state's rules and, when a shortage appears, get advice before you act.
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Hand the monthly reconciliation to someone who will actually do it
DocketHire places trained remote legal billing and trust accounting support with US law firms, working in your software under your supervision. Book a free consultation and we will scope the role to your caseload.