Record-Keeping How-To’s: A Comprehensive Guide to the Account Journal

Trust Account Bookkeeping
May 14, 2024

Understanding the intricacies of Rule 1.15(d)(3) and maintaining precise records is not just a legal requirement, it's a commitment to maintaining client trust. This is especially vital when it comes to client trust bank accounts, where accuracy and transparency are non-negotiable. At SmartBean®, we recognize the gravity of these principles and are dedicated to assisting our clients in navigating the complexities of financial record-keeping. 

In this guide, we'll explore the importance of record-keeping and provide you with practical tips to master the art of maintaining an impeccable account journal.

What Is the Account Journal? 

Rule 1.15(d)(3) and (e) stipulate that an attorney must maintain a “written journal” for each client’s trust bank account. For individual clients with their trust accounts, only a client ledger must be in compliance. However, attorneys also need an account journal for the clients within pooled trust accounts.

Maintaining an account journal is similar to managing a client ledger but with a nuanced focus on the information provided. The account journal should:

One key distinction between the two record-keeping tools, the client ledger and the account journal, is the running balance. While both maintain a running balance, the account journal's balance is specific to each client trust bank account, whereas the ledger tracks the balance for each individual client. This distinction is crucial to understand for accurate financial record-keeping.

Once you understand what an account journal is, the next step is to identify the specific types of transactions and details that need to be meticulously recorded.

What Is Recorded in the Account Journal?

An account journal is a comprehensive record of all financial transactions within your law firm. It is essential to document every detail meticulously to ensure transparency and accuracy.

Here are the key elements that you should record in the account journal:

After deposits, attorneys should add the amount to the account’s old balance to provide the new total.

Handling Multiple Check Deposits

When depositing multiple checks at once, each check must be recorded as a separate deposit. Each payment entry should list the client, the date, and the payment amount. After every payment, the amount should be subtracted from the account balance to provide the new total. To illustrate this process, refer to the image below:

screenshot from the california state bar website, depicting a detailed financial account journal entry for a common client trust bank account
Image sourced from the California State Bar.

By understanding how to accurately handle multiple check deposits, you can maintain a precise account journal. Now, let's explore the 5 best practices for ensuring your account journal remains reliable and effective.

5 Best Practices for the Account Journal 

As legal professionals, maintaining meticulous financial records is not just a requirement; it's a best practice that inspires trust and confidence in your clients.

Here are the 5 best practices for keeping an accurate and reliable account journal, each one designed to enhance your professional reputation and ensure compliance.

  1. Record Every Transaction Promptly

Recording every transaction, be it a deposit or a payment, in the journal is not just a best practice, but a necessity. Equally important is the timing of this task. It must be completed within the first 24 hours of the transaction.

Any delay beyond this window could lead to incorrect or missed tracking of the transaction, potentially compromising the accuracy of your financial records. 

  1. Document All Deposits and Bank Charges

If attorneys keep their money in the account to cover bank charges (a certain threshold is permitted by the State Bar for this purpose), you must also record every deposit of your funds and bank charge. For interest-bearing trust accounts, attorneys must record any interest credited to or charged from the account in the journal. 

  1. Include Check Numbers and Payee Information

Add the check number and the payee/money source for tracking and auditing. This part isn’t necessarily required; however, without it, you may be unable to recall the amount deposited. The deposited amount must be in compliance with rule 1.15(d)(3) and (e). 

  1. Chronological Entry of Transactions

Do you need a refresher on the order in which transactions are recorded in a journal? The answer: as they happen. Transactions should go into the journal chronologically and immediately.

  1. Leave Blank Lines After the Month’s Last Entry

Be sure to leave blank lines after the month’s last entry. Since it is necessary to calculate the running balance after both payments, you can add entries during reconciliation. 

Implementing these best practices can significantly enhance the accuracy and efficiency of your financial record-keeping. By adhering to these guidelines, you’ll ensure compliance, improve client trust, and streamline your law firm's financial management. On the other hand, not following these practices could lead to inaccurate financial records, potential legal issues, and a loss of client trust.

Want Record-Keeping Help? SmartBean® is Here for You

Having explored the best practices for maintaining an accurate account journal, you might find yourself needing expert assistance to streamline your record-keeping process. That's where SmartBean® can make a difference.

Maintaining an account journal as per rule 1.15(d)(3) and (e) may seem like a meticulous task, but with SmartBean®, it's not as daunting as it sounds. We ensure transparency, accountability, and compliance, making maintaining pristine financial records a breeze.

Ready to implement these best practices and maintain pristine financial records? Contact us today for a free consultation, and let us assist you in this process. With our expertise and user-friendly platform, you can streamline your record-keeping. Let us assist you in maintaining pristine financial records with ease!

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