How to Set Up Trust Accounting in QuickBooks Online

1. Open Chart of accounts under Settings or Accounting, select New, and create the actual IOLTA account as account type Bank (Trust account detail type where available). Name it for the real bank and purpose. Keep the firm's operating Bank separate.
2. Create one Other Current Liabilities account, detail type Trust Accounts - Liabilities where available, named Client Trust Liability for that real bank. A second real trust Bank needs a second matching liability; do not net their balances.
3. In Customers, create the case Customer, for example Sample Client - PI-0000. Keep each matter distinct and review existing billing Customers, sub-customers or Projects before creating duplicates. Do not create a class or liability sub-account per case.
4. In Settings > Account and settings > Expenses > Bills and expenses, enable Track expenses and items by customer where available. Confirm the Customer field on the actual payout form. Do not enable billable expense treatment just to obtain a field.
5. For existing books, use verified matter opening balances and the accountant's cutover plan. Restrict auto-add bank rules: match downloaded activity to the recorded receipt or payout, without creating duplicates or dropping the Customer.

One payment keeps both names. The medical provider receives the payment; the case Customer identifies whose trust money is used.

• Payee: who receives the payment. Example: Medical provider (Vendor).
• Bank account: where the money comes from. Example: IOLTA - Main.
• Category/account on the line: which liability is reduced. Example: Client Trust Liability.
• Customer/Project on the line: which case the payment belongs to. Example: Sample Client - PI-0000.

1. Choose + Create / + New > Bank Deposit. Select the real trust Bank and actual receipt date. In Add funds to this deposit, use Received from = case Customer, Account = matching Client Trust Liability, and the amount/reference. Save and inspect both bank and liability detail. Confirm collected funds with the bank before paying.
2. For a third-party payout use Check or Expense, the actual Vendor/payee, and the trust Bank. In Category details select Client Trust Liability and the case Customer on each distribution line. Inspect the saved allocation; if your form uses Item details, use an accountant-approved item mapped to the liability as described in Intuit's retainer article, not an operating expense.
3. For the client's own share, use the existing Customer as the payee on a supported Check/Expense form, not a duplicate Vendor. Keep the same case Customer on the liability line; header payee and ownership allocation serve different purposes.
4. For authorized earned fees, record a Customer-allocated trust payment against Client Trust Liability to the firm's operating account and record/match the operating receipt as earned income or settlement of an existing receivable. A bare Transfer does not supply the liability reduction. Do not also apply an invoice retainer credit that reduces the same liability a second time.
5. Pay independent case-cost advances from operating using the accountant-approved cost/asset treatment. Retain the settlement statement, approvals, bank confirmation and payment references. Match bank-feed items to these saved entries.

In the correct entity, open the Balance Sheet through the cutoff, select the Client Trust Liability amount to drill into its transactions, then Customize > Rows/Columns > Group by Customer where available. Intuit documents this workflow for Online; IES report views and grouping must be verified in your entity. Transaction Detail by Account is another option only where it includes the required detail.

Include all history through the cutoff or a verified opening balance, not only the current month's movement. If the report cannot group the complete liability activity by Customer/matter, export it and prepare an accountant-verified matter schedule. Dimensions, receivables and profitability reports are not substitutes for trust balances.

Verify the sign convention and PI-0000's $100 balance. Inspect blank or Not specified Customers, wrong matter assignments and every negative ledger. Save the report and confirm that the matter total equals this entity's matching liability and trust Bank books; repeat for every account.

1. Open Reports > Standard reports > Balance Sheet. Set the end date to the reconciliation cutoff and include all prior activity, or an approved brought-forward opening. Open the amount for Client Trust Liability.
2. In the transaction report choose Customize > Rows/Columns > Group by Customer where available, then Run report. Display the matter identifier and save customization as Trust Balances by Client. Report names and Modern/Classic views vary; test this in the chosen plan.
3. For PI-0000 in the example below, verify an ending liability of $100, not an A/R balance and not only this month's movement. Review blank or Not specified names, negative balances and transactions assigned to the wrong matter.
4. Confirm the complete client schedule totals to the matching liability and trust Bank book balance at the same cutoff. If the report omits a transaction type or cannot group it, stop relying on it and have the accountant verify a full exported matter schedule before live use.

1. In Reconcile (under Accounting or Transactions in your navigation), select the real trust Bank account in the correct company/entity. Verify the beginning balance, statement date and ending balance.
2. Mark only deposits and payments appearing on the bank statement. Investigate missing or duplicate transactions and any opening-balance change. Finish with a zero difference; do not create an unexplained adjustment to force a match.
3. List outstanding checks and deposits in transit at the same cutoff. Adjust the statement balance for those timing items and compare it to the trust Bank book balance and matching liability. Investigate fees or interest under the accountant's and lawyer's policy.
4. Total the complete matter ledgers, including verified openings, through that cutoff. Compare them with the matching liability; resolve blank names, wrong matters and negative balances individually. Equal grand totals can conceal misallocated client money.
5. Save the bank reconciliation report, statement, liability detail, matter ledgers, outstanding-item list and reviewer sign-off together. Protect the approved period and investigate later changes.