For Law Firms

How to Reconcile an Attorney Trust Account in QuickBooks

Updated June 16, 2026 · 8 min read · By QB Assistant

• 1 — trust bank = 1 trust liability account
• $0 — firm money allowed in the trust account
• Monthly — recommended reconciliation cadence

Step 1: Set up the trust account structure correctly

Before you can reconcile, your chart of accounts must mirror how trust money actually works. The bank account and the liability must move together: every dollar in the trust bank is a dollar you owe to a specific client.

1. Create a dedicated bank account for the IOLTA/trust account — never the operating account.
2. Create a current-liability account (e.g., 'Client Trust Liability') that mirrors the trust bank balance.
3. Add each client or matter as a sub-customer so you can track an individual ledger per client.
4. Never deposit firm funds into the trust account beyond a small, state-permitted amount for bank fees if your state allows it.

Step 2: Record trust activity against the client, not as income or expense

Money received into trust is a liability, not income. Money paid out of trust reduces that liability — it is never a firm expense. This single principle prevents the most common (and most serious) trust accounting error.

• Deposits: increase the trust bank and the client's trust liability together.
• Disbursements: decrease the trust bank and the same client's liability — code to the liability, never to an expense account.
• Earned fees: transfer from trust to operating only after the fee is earned and invoiced.

Step 3: Reconcile the trust bank account monthly

When the bank statement closes, use QuickBooks' reconcile feature to match every cleared transaction. Account for outstanding checks and deposits in transit so your adjusted bank balance reflects reality.

Step 4: Run the three-way reconciliation

This is the step QuickBooks does not do for you. Compare all three balances; they must be identical:

Note: If any client's ledger is negative, you have spent one client's funds on another's matter — stop and correct it immediately.

Step 5: Document and store the reconciliation

Save a dated copy of each three-way reconciliation, the bank statement, and the client-ledger report. Most state bars require you to retain trust records for several years; this documentation is your defense if your trust handling is ever questioned.

QB Assistant automates Steps 4 and 5: it reads your QuickBooks trust data, produces the three-way comparison, flags any disbursement coded to an expense, and gives you a reviewable record — without exporting spreadsheets by hand.