Trust Accounting – The Basics
The money in our Real Estate trust account or accounts does not belong us, we hold the money “in trust” for our clients until it is distributed. Funds in a trust account must be accounted for, which is where Trust Accounting comes in.
What is Trust Accounting?
To uncomplicate the wording, Trust Accounting is basically bookkeeping of trust accounts in accordance with state legislative requirements. Requirements will differ from state to state, but there are a few rules in common. Maintaining accurate records is a must.
Trust Accounting has some very specific auditing requirements, which are used to maintain accurate information for the client and the real estate. Trust Accounting requires:
- Tracking of all deposits and payments made through the account.
- A detailed ledger that notes every transaction for each client being, Owner, tenant, creditor, vendor, buyer or Agency.
- An account journal for each account, tracking each transaction through the account.
- Monthly reconciliation of the trust account (at a minimum).
Trust Account Funds
A trust account is not the same as a general business accounts and only certain funds should be placed in or taken out of your trust account.
Types of trust account funds:
- Rent deposits
- Sales Deposits
Trust account funds should never be used for:
- Personal income
- Wages
- Slush Fund
Janine
For more information on Trust Accounting & how we at Real+ can help you, check out our Outsourced page.
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