Trust Reconciliations Adjustments

Modified on Thu, 3 Oct at 6:02 PM

As you process a trust bank reconciliation in Actionstep you are able to enter in Adjustments to that bank reconciliation. These allow you to finalize your reconciliation accurately.

These adjustments will also affect how your next bank reconciliation will be handled and in this article, we explain why you do adjustments to bank reconciliations and why they affect the opening balance of your next bank reconciliation.

For more information on how trust bank reconciliations work in general, see Trust Reconciliations.

What Are Adjustments to a Bank Reconciliation?

Essentially, the reason we have adjustments is for a user to account for a transaction that is in Actionstep but is not included in the bank rec.

This can happen to any trust accounting user but it happens in Australia a lot because (due to Law Society rules) a bank reconciliation can only show transactions that were entered into Actionstep within the bank reconciliation's time period. This means any transactions that were entered after the bank rec closing date but backdated into the bank reconciliation, do not appear.

When you create an adjustment you are creating a temporary record of that transaction. The transaction exists in Actionstep already, just not in the bank reconciliation. You have checked the transaction is entered correctly, so you create an adjustment.

NOTE: Before you create an adjustment to a trust reconciliation, make sure that the transaction is entered into Actionstep. If not, enter it then refresh your trust reconciliation. If the transaction is still not included, consider creating an adjustment for it.

How Adjustments Affect Your Next Bank Reconciliation

What happens when you create your next bank reconciliation, is all those transactions that you created adjustments for, will now be included in the new reconciliation. If you had five adjustments from last month's reconciliation they were not reconciled last month and will appear as unreconciled transactions in this months.

If we did not adjust the opening balance of the new reconciliation by the amount of the previous adjustments, then the transactions that those adjustments were for, would mean you could not reconcile this reconciliation.

EXAMPLE:

This might be easier with an example.

For simplicity's sake, imagine a firm starting trading on 1 Jan with no prior transactions. And to keep things simple, they only seem to get deposits.

January's bank reconciliation

In January the firm had ten transactions of $1,000 each which they entered into Actionstep.

The last transaction was entered into Actionstep on 1 February and dated 30 January.

As the firm reconciles January, they notice they are $1,000 out. They check they have entered the transaction into Actionstep already (which they have), so they do a $1,000 adjustment.

January is now reconciled with a closing balance of $10,000.

February's bank reconciliation - without changing the opening balance

In February, the firm also got another ten transactions of $1,000 each. This time, no backdating happened.

If we just used the closing balance of the Jan bank rec for the opening of the Feb without adjusting, it would be $10,000.

We know the closing balance is $20,000.

As we do the reconciliation, we will see eleven transactions. The ten that were entered into Actionstep in February and the one transaction from January that was not reconciled because it did not appear in the January bank reconciliation.

Reconciling all items means that the reconciled balance is $21,000. Out by $1,000.

This is why we use the closing balance of the last bank reconciliation as the opening balance of the new reconciliation but we adjust (reduce or increase) it by the amount of adjustments on the previous bank reconciliation.

February's bank reconciliation - with changing the opening balance

When we apply that logic with the above example, the opening balance of our February bank reconciliation will be $9,00.

The closing will be what we entered: $20,000.

We will have eleven transactions of $1,000 each. Ten will be from the month of February and one will be unreconciled from January.

Reconciling all transactions will mean that the reconciled balance equals the closing balance and we can complete the reconciliation.

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