Trust can be deposited through cash receipts. When the batch is posted, it will debit TRUSTASSET and credit TRUSTLIABILITY. It also automatically creates a Journal entry batch behind the scenes
Entering a trust adjustment to create a beginning balance:
- This is primarily done if they are coming from another software package and need to enter a beginning trust balance. A journal entry is created behind the scenes and it will debit TRUSTASSET and credit TRUSTLIABILITY.
- When entering a trust balance this way, it will throw off the G/L. They will need to enter a reconciling entry for the trust bank to offset this ‘out of balance’ issue. Do NOT post to G/L.
Entering a true adjustment
- This is used if they client keyed in a deposit incorrectly.
- Enter a negative amount to the client/matter they need to remove the trust from and enter a positive amount to the correct client/matter.
- This credits the TRUSTASSET account and debits the TRUSTLIABILITY account for the client/matter that was incorrect and credit the TRUSTLIABILITY and debit the TRUSTASSET for the correct client/matter.
If a client enters an incorrect deposit through cash receipts, it should be corrected by doing a negative cash receipt.
Applying trust in Prebill Edit
- When trust is applied in edit prebill, the In-Transit account (or clearing account) is debited and an A/R account (the client will decide which one) is credited. This can be seen on a trial balance.
- After the bill is posted, a voucher is automatically created behind the scenes to the Firm Vendor. (this voucher can be seen if you go to view Vendors and view the vouchers.
- A check must now be written for that voucher. There is now a debit to the TRUSTLIABILITY account and a credit to the TRUSTASSET account.
- A cash receipt must now be entered. Enter is on the ‘Other’ tab and choose the operating account. The Other tab is used because it is a non-client cash receipt.
- The cash receipt will debit the operating account and credit the In-Transit account.
Debits/Credits
|
Trust is deposited |
DEBIT to Trust Asset CREDIT to Trust Liability |
|
Bill that has Trust applied is posted |
DEBIT to Trust In-Transit CREDIT to A/R Account |
|
Write and post the check for the Firm voucher that is created |
DEBIT to Trust Liability CREDIT to Trust Asset (Now, the CREDIT and DEBIT for the deposit is canceled out) |
|
Enter Cash Receipt to the OTHER tab |
DEBIT to Regular Operating Account CREDIT to Trust In-Transit (Now the In-Transit is canceled out and the firm receives the Trust applied as income) |