Three-way reconciliation doesn't balance? Find the difference
A three-way reconciliation compares three numbers as of the statement date: the adjusted bank balance (statement ending balance + deposits in transit − outstanding checks), the trust account ledger (journal or checkbook) balance, and the total of the client ledgers. When they don't agree, the fastest route is to find out which pair disagrees first, because each pair points to different mistakes.
1. Write down the three numbers and the gaps
| Adjusted bank balance | A |
| Trust ledger balance | B |
| Total of client ledgers | C |
| Bank vs ledger | A − B |
|---|---|
| Ledger vs clients | B − C |
If all three disagree, fix bank vs ledger first. Once that ties, the remaining gap is between the ledger and the client ledgers.
2. Bank and trust ledger don't agree (A ≠ B)
- Something on the statement isn't in the ledger. Bank service charges, interest credited to the account, returned (bounced) deposits, wire fees and bank corrections are the usual ones. Go through the statement line by line and tick off each item against the ledger.
- Something in the ledger isn't on the statement, and isn't on your outstanding list. Check last month's list of outstanding checks and deposits in transit: items that still haven't cleared must be carried forward, and items that cleared this month must come off.
- Wrong statement figures. Confirm the ending balance, the statement period and that you used the same cut-off date for every list. Checks written after the statement date don't belong on this month's outstanding list.
- An amount recorded wrongly. If the difference divides evenly by 9, look for two digits swapped (for example $1,540 entered as $1,450). If the difference is exactly twice one transaction, it was probably entered as a deposit instead of a disbursement, or the other way round.
- A transaction entered twice, or a check recorded under the wrong number.
3. Trust ledger and client ledgers don't agree (B ≠ C)
- An entry with no client. A deposit or disbursement recorded in the account journal but never posted to a client ledger (or posted to a client ledger only). Compare each journal entry for the month with the client ledgers.
- Opening balances. If the ledger starts with a lump-sum opening balance, every dollar of it still needs to belong to a client.
- Bank fees and interest. If the firm keeps its own funds in the account to cover fees, they need their own ledger, and your rules decide how it's shown on the reconciliation.
- Negative client balances. A client below zero lowers the client total, and it also means other clients' money was used. That's a problem in itself, not just a reconciling item. See negative client ledger balances.
Posting an entry to the wrong client doesn't change the total, so it won't show up here. It shows up as one client too high and another too low, which is why the client balances are worth reading line by line, not just in total.
4. Don't force it
Don't make the numbers agree with an unexplained adjustment. Find the cause, correct it with a dated, explained entry, and reconcile again. Keep the working papers with the reconciliation. If client money is actually short, your state's rules say how and how quickly it must be replaced and whether it must be reported. Read them, and get advice from your state bar's trust accounting resources or your accountant.
Let Tiesheet do the matching
Tiesheet reads your bank statement CSV and trust ledger export in your browser and lists the things above for you: bank transactions that aren't in the ledger, outstanding checks and deposits with their age, stale checks, possible duplicate entries, entries with no client, negative and dipping client balances, and client balances that don't match a client listing you provide. Try it with sample data, which deliberately doesn't balance by $12, or see pricing for the full client ledger report and Excel workbook.
The steps above follow published bar guidance, checked 2026-11-10: the State Bar of California's monthly reconciliation preparer instructions and the Alabama State Bar's trust account workbook instructions.
Last reviewed 2026-10-27. General information, not legal or accounting advice — your state's rules decide how trust accounts must be kept and reconciled.