Do you need help understanding how to reconcile your trust account each month?

The rules for reconciling real estate trust accounts can be found on the
Commission's website.

Start with your trust account bank statement for each transaction shown as cleared on the bank statement check it off as cleared on the trust account general journal. Identify any transaction shown as cleared on the trust account bank statement that has not been recorded on the trust account general journal. In this case printed check charges are shown as cleared on the bank statement but the charges have not been recorded on the general journal.

So let's record the printed check charge on the journal.

Don't forget you need to post the printed check charges on the appropriate ledger too. In this case the company funds ledger. 

Now we're ready to prepare your bank reconciliation. Start with the month ending balance on the bank statement.

Enter or write that balance on your bank reconciliation.

We are preparing this bank reconciliation for the period ending January 31st. The ending balance from the bank statement is 3185 dollars. Any deposits in transit as of January 31st must be added to the ending balance of the bank statement. Deposits in transit are deposits that have been recorded on the trust account general journal but they have not cleared on the bank statement. In examining the trust
account general journal you can see that the January 31st deposit in the amount of 2500 dollars has not been checked off as cleared. So enter that deposit in transit on your bank reconciliation.

Any outstanding checks as of January 31st must be subtracted from the ending balance of the bank statement.

Outstanding checks are checks that have been recorded in the trust account journal but they have not cleared on the bank statement. In examining the trust account general journal you can see the checks number 102 and 104 have not been checked off as cleared.

So enter the outstanding checks on your bank reconciliation.

Now total your outstanding checks. Next add deposits in transit to your ending balance from the bank statement and subtract outstanding checks to get your reconciled bank balance.

Compare your reconciled bank balance of 4220 dollars to the balance on your trust account general journal as of January 31st. These balances should agree.

In our example the balances do agree and you have finished preparing your bank reconciliation.

If the reconciled bank balance as of January 31st does not agree with the trust account general journal balance as of January 31st then you have an error.

Some helpful hints to find the error our check your bank reconciliation by making sure you entered the right amounts on the reconciliation and that the math is correct.

Check your math on the trust account general journal. Retrace the deposits and checks and any other debits and credits clearing on the bank statement to the trust account general journal making sure the amounts agree.

Once you have reconciled the month and bank statement balance to your general journal balance then you must determine if the general journal balances to your ledgers. To do this, prepare a trial balance of all your active trust account ledgers.

In this example there are four active trust account ledgers. The company funds ledger with a $75 balance the Main Street ledger with a $2500 balance the North Boulevard ledger with a $600 balance and finally the Johnson Street ledger with the $1045 balance.

Prepare your ledger trial balance from the active trust account ledgers you identified. First title your document. Next list your ledgers and the balances on the ledgers as of January 31st after you've listed all the active ledgers and the balances add the balances together to determine the total. In this example the total of the ledgers is $4220.

Now compare the total on your January 31st ledger trial balance to your January 31st trust account general journal balance.

They must agree. Here you can see that the balances are both $4220 and the $4220 also equals your January 31st reconciled bank balance. Your last step in completing your trust account reconciliation is to prepare a worksheet showing that the balances of your trust account general journal your ledger trial balance and your reconciled bank statement balance are in agreement as of the January 31st cutoff date.

You can do this by recording the trust account general journal and reconciled bank balances on the ledger trial balance.

Now you have reconciled your real estate trust accounts in compliance with the Real Estate Commission's rules.

Be sure to maintain your monthly trust account reconciliations for a period of three years.

For more information go to ncrec.gov or give us a call.