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kobiadato1603
January 31, 2019
Question

How do i set this Trust account

  • January 31, 2019
  • 3 replies
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I have a customer that transferred money to a trust account. How do i set an account for it? what do i select as account type and detail type?

    3 replies

    K
    kobiadato1603Author
    February 2, 2019

    Any ideas how to do it? can someone help me please

    A
    Anonymous
    February 3, 2019

    Hello, kobiadato1603. 

     

    Here’s how to create a trust account in QuickBooks Online:

    1. Click the Gear icon at the top and select Chart of Accounts.  
    2. Select the New tab at the upper right corner.
    3. For Account type. Select Other Current Liabilities.
    4. Select Trust Accounts under Detail Type.
    5. Type in your desired name under Name.
    6. Click Save.

    It’d still be best to consult your accountant to create the account properly.

     

    Thanks for dropping by.

      T
      Treasur2
      April 11, 2019

      What version of QB should one have to do so?

      L
      LauraD
      February 4, 2019

      For trust accounting, you need to be able to answer the following 'tests' -

      1) Does the trust bank account balance match the trust liability account balance (as of any given date)?

      2) Do you have a report listing each client's trust balance, the total of which equals the trust bank account balance (as of any given date)?

      3) Do you have a detailed ledger, for each client, which shows the specifics of the ins and outs of the trust monies (as of any given date)? 

      All of the above can be accomplished using QuickBooks (PC or Mac), but specific procedures (see below) need to be followed and reports need to be created to meet the required standards.  

      I do not recommend using QuickBooks Online for trust accounting, due to the reporting limitations of that program. 

      If you do want to use QBO, you need to use the PLUS version so that you can associate client monies (and costs, if applicable) on every applicable transaction.

      Also, I do not recommend using the bank feed in QBO for the trust account, since every transaction needs to be posted as of actual date, not cleared date, and associated with the client name.

      Trust accounting in QuickBooks is a little tricky and needs to be tracked using specific procedures in order to get good reporting for the Funds Held in Trust (escrow) detail by client.

      Here is my general procedure for tracking trust accounts in QuickBooks -

      Deposit the retainer/settlement check into the Trust/Escrow bank account, using a Funds Held in Trust (Escrow) liability account with the client name in the name field. I do this directly in the Make Deposit form, but you can enter a sales receipt, using an item which points to the liability account. 

      Then, write checks for any disbursements of those funds, using the Funds Held in Trust (Escrow) account on the expense tab of that check - with the client name in the name field on that line. Or, if you want the detail of how those disbursements are made, create separate items, all pointing to that account, to indicate what that 'paid out' is for - Insurance, taxes, fees, etc.

      Then, if applicable, invoice the client. . .for the professional fees (time or flat fee billings) and any advanced costs (previously paid out of the operating account) as separate items. . .

      Then, cut a check from the Trust/Escrow bank account to the business (law firm, or?), using the Funds Held in Trust (Escrow) account on the expense tab of that check - with the client name in the name field on that line.

      Then, 'Receive payment', using the client name, and attach that payment to the open invoice.

      Then, deposit the funds into the operating checking account, either directly from the payment, or via Undeposited Funds.

      I have created a group of memorized reports to show the client trust activity and balances to use when reconciling/reporting client balances and/or the bank statement.  These provide the necessary 3-way reconciliation (as of any given date):

      Trust Bank = Funds Held in Trust (liability) = Total of individual Client Fund Balances, with ledger detail

      These are two completely separate areas of your business and the transactions need to be recorded as such. . .so much so that some law firms track their trust accounting in a separate QuickBooks file (although I don't see the need for that myself).

      Note: There is no way to automatically show the trust balance on an invoice.  You can, however, create a custom field, or enter a line in the description field, to notate the remaining trust fund balance. The amount will have to be manually entered on each invoice.  If you put the amount remaining in the memo field, it won't print on the invoice, but will show up on statements and in the customer center.

      ____________________________

      Review the above procedure(s) step by step and confirm that this meets your state's regulations and reporting requirements.

      If you still need help, I suggest that you contact someone directly for assistance. 
      You can search www.findaproadvisor.com if you want someone local.
      Also - many of us work remotely and can be contacted via the info on our websites or profiles.

      I hope this helps,

      Laura D  
       
      **The biggest problem with using QBO for trust accounting is that your auditor will be requesting bank reconciliation reports, which you cannot get from QBO.  Yes, you can get bank rec reports, but they will not be updated with any changes that have happened to your data since you did the bank rec, which in 'real life' is an unreasonable expectation. 
        R
        RCV
        July 16, 2019

        We appreciate you joining in this thread, gulfsidebooks.

         

        You can correct the deposit posted in the Operating account by editing the transaction in the register. Then, link the deposit to Trust account.

         

        For more details, you can follow the steps below:

         

        1. Click Accounting in the left menu.
        2. Choose Chart of Accounts.
        3. Choose Operating account, and click View register.
        4. Choose the Deposit transaction.
        5. Click Edit.
        6. Under Account, change it to Trust account.
        7. Click Save and close.
        8. Click Yes to confirm.

        The correct amount will show in the balance sheet as long as you're not selecting other payments to be included in the deposit.

         

        You can check out this article for more details about managing and recording bank deposits: Record and Manage Bank Deposits in QuickBooks Online.

         

        If the deposit is matched to the downloaded transaction, you'll need to unmatch it first before you can change the account.

         

        If the transaction is already reconciled, I'd suggest consulting your accountant for advice before editing it.

         

        Just hit the Reply button if you need anything else with bank deposits. I'm here to help.

        HoneyLynn_G
        HoneyLynn_G
        July 16, 2019

        Thanks for commenting back in this thread, @gulfsidebooks.

         

        We don't advise moving amounts that have been reconciled for it will mess up your accounting. You'll have to unreconcile it first. Once done, transfer the money and reconcile it again.

         

        Here's how:

        1. On the left navigation, click Accounting and Chart of Accounts.
        2. Select the account you want to change, hit View register.
        3. Click on the transaction.
        4. In the Reconcile Status column (indicated by a check mark), change the status of the transaction into Blank (unreconciled).
        5. Tap Save.

        Once done, you can create a bank transfer to move the money:

        1. Click the Create (+) icon and choose Transfer.
        2. From the Transfer Funds From drop-down, select the bank account that the funds are coming from.
        3. From the Transfer Funds To drop-down, select the bank account the funds are being deposited into.
        4. In the Transfer Amount field, enter the amount being transferred.
        5. Edit the Date.
        6. Hit Save and close.

        Lastly, reconcile the correct bank again. Just follow the first instruction, but the status of the transfer should be R (reconciled).

         

        For further details, you can refer to this article: How do I clear, unclear, reconcile or unreconcile transactions?.

         

        In case you need tips and related articles in the future, visit our QuickBooks Community help website for reference: QBO Self-help. 

         

        Keep me updated in the comment section if you have follow-up questions about banking. I'll be around to help you more. Wishing you all the best!

        J
        JonathonFishman1
        July 2, 2019

        So glad you asked and there are lots of good answers, here. At LeanLaw, we made some videos about how to do IOLTA trust accounting with QuickBooks Online alone and with QBO + LeanLaw (in the QB App Store). Here is the QBO stand alone video: https://youtu.be/iclN4_2TMME Here's the QBO + LeanLaw video: https://youtu.be/vB1B3VY2CeQ And here's the post with both of them together: https://www.leanlaw.co/chart-of-accounts-trust-accounting-qbo-video/ The post has all the instructions written, if you prefer your information that way. And check out LeanLaw. We've put a lot of thought into streamlining trust accounting so that it's easy on the accounting pro and you can even automatically put the trust balance into the invoice. www.leanlaw.co

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