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Checks and Three-Way Trust Accounting

... Export accounting data

All paid versions of Power Closer automatically calculate a balanced set of closing checks and deposits, and print this information on the Balance Sheet. If you use Power Closer Jr., you can use this information to create checks manually.

It may take ten or twenty minutes to become familiar with balancing the closing and allocating the checks. You can automate check allocation by making changes to a closing template that you otherwise would routinely make to a closing. Power Closer 3.2.15 and up can combine a closing's deposits to match the bank statement.

Power Closer Standard Single User and multi-user versions export the bookkeeping information shown on the Balance Sheet so that it can be imported into accounting software.

Prepare checks automatically. It typically takes a minute or two to export and produce the checks for a closing. That does not count the time the printer takes to crank them out, but it does include the three-way trust account reconciliation at the end of the month. To the extent that the checks are formulaic, it also includes the head scratching. If you are using the bookkeeping interface and it is taking longer than a minute per closing to produce checks, review Balancing the Closing or contact tech support.

Expect it to take something on the order of an hour to start using the bookkeeping interface. It may take this long to learn to produce closing checks, to make manual corrections in QuickBooks, to produce QuickBooks detailed and summary reports and to perform monthly bank account reconciliation and three-way trust accounting in accordance with your jurisdiction's ethical standards. This assumes that you are not familiar with QuickBooks but are already somewhat comfortable with computers and with the basics of trust accounting.

Three-way trust accounting in a general sense involves:

  1. A trust bank account journal showing all deposits, all checks, and a balance commonly called the balance per books.

  2. A trust ledger showing all deposits and checks and a balance separately for each matter. The total of all the matters should match the balance per books. It may be appropriate to adjust for items that are in the bank account but do not belong in the trust ledger, if so provided in your jurisdiction's ethical standards and requirements.

  3. A monthly bank account reconciliation, which takes the ending balance on each bank statement and arrives at the balance per books by adjusting for those items that have not yet cleared the bank.

This is a general description. You should consult your professional association or licensing agency for the specific requirements for trust accounts in your location.

QuickBooks is the preferred accounting software for use with Power Closer. You can use any version of QuickBooks Basic 1998 or later and QuickBooks Pro 2006 or later. This should run you under $200. Power Closer 3.2.15 and up can manage up to ten trust bank accounts at any one time in QuickBooks Basic. By the way, the multi-user versions of QuickBooks will only import checks in single-user mode. Trust accounting makes no use of advanced QuickBooks features. The introductory QuickBooks Simple Start Edition does not work because it does not have the import feature.

Other accounting software can be used. Many Power Closer customers happily use older versions of Quicken (Quicken 98 through 2004), though some problems have been noted. A few customers are using Microsoft Money, but best avoid Microsoft Money Plus. If you are considering something other than QuickBooks, you may contact us to get more clear about technical considerations.

Keep your trust accounts separate. We recommend that you place your trust accounts in a separate file (what QuickBooks users call a separate "company") from your firm's operating accounts or personal funds. Segregating the trust accounts helps to avoid inadvertent commingling of funds, and may make it easier to audit and produce financial and management reports. It also simplifies security and questions about responsibility.

Checks are set "to print" with no check number. Printing the checks adds the check number. QuickBooks and Quicken users order Quicken-compatible checks from their check printer that conform to their bank's technical specifications. The checks may be three on a page or, more likely, one check across the top, a voucher across the middle and a second voucher on the bottom. If the voucher is confusing or misleading, as is likely to be the case for Yield Spread Premium checks, just pull off the voucher. 

Bookkeeping reports, bank account reconciliation and trust accounting are all nicely handled in QuickBooks. Power Closer places the unique closing file name (you may call this the file number or matter number) for a closing in the field that QuickBooks calls the "Class". (This is called the "Category" in Quicken.) QuickBooks and Quicken create reports that are sorted, totaled and filtered by Class (or Category), enabling you to print the trust account ledger.

QuickBooks, unlike Quicken, can make reports that are summarized by Class. For example, you may want a report with only one line per closing, showing the amount remaining to be disbursed, and omitting closings with zero balances. The Power Closer User Guide describes these reports.

You can turn off the option to export "split detail". For more about this, see:

Manual changes can be entered directly into QuickBooks. When you do that, take care to spell the File Name correctly in the Class field. Make a new QuickBooks report that verifies your work, proving that the manual change was entered in the correct closing, and with the expected balance of funds remaining to be disbursed. Consider carefully before editing items that have cleared the bank or manually changing the cleared status of items. For more, see: "QuickBooks reconciliation's opening balance is wrong."
 

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