Bank Reconciliation - Legal Accounting

In this article:

• Bank Reconciliation Overview
• Beginning a Bank Reconciliation 
• Loading an Electronic Bank Feed (Optional)
• Inputting Outstanding Entries
• Performing a Bank Reconciliation 
• Understanding Receipts vs. Deposits
• Clearing Items on a Bank Reconciliation 
• Entering a Missing Deposit
• Inputting Bank Errors
• Finalizing a Bank Reconciliation
• Reading the Reconciliation Report
• Reviewing Previous Reconciliations

Bank Reconciliation Overview

Legal Accounting’s bank reconciliation feature enables a firm to account for all the funds it manages, including trust money. It allows firms to compare the data that has been entered into the system with the actual transaction(s) that have occurred at the firm’s financial institution(s). It also aids in identifying stale-dated checks as well as any clerical errors made at a bank or by the firm. These errors can then be corrected, ensuring that the firm’s accounting is accurate.

Beginning a Bank Reconciliation 

To begin a bank reconciliation:

1. In Legal Accounting, navigate to Bank Admin > Feeds and Reconciliation page.
   
2. Select the bank account to be reconciled by clicking in the Bank Account field and choosing from the drop-down list of available accounts.
   
3. Click the Run button to load the information that Legal Accounting has for this account during the period in question.
   If there was already a reconciliation performed for the account, the Start Date is automatically set to the day after the last reconciliation end date, and will be greyed out. 
4. Enter an End Date. 
5. Click Submit.
   

Loading an Electronic Bank Feed (Optional)

An electronic bank feed file contains information about all the activity that occurred in a bank account during a specific period. Loading a bank feed file directly into Legal Accounting has two important advantages. For the period in question, the system can: 

• Identify entries that have not yet been recorded in Legal Accounting (such as interest or bank charges)
• Mark as cleared all items for which it has a corresponding match. 

Most financial institutions will provide bank feed files in either QBX or QBO format. To load a bank feed file into Actionstep Legal Accounting, you can either click in the designated ‘drop’ area on the page and choose from the displayed list or drag and drop the file directly onto that area. 

Inputting Outstanding Entries

Before a reconciliation can be performed, all outstanding entries must be entered into the system. These include checks and/or receipts which are reflected in the Bank Journal Opening Balance but have not yet cleared the bank. 

To begin entering your outstanding entries:

1. Select the Prior Outstanding tab.
   
2. Specify if you are entering a check or a receipt by clicking the appropriate button at the bottom of the screen.
3. For each Outstanding Checks, enter the following information:
   • Date: Enter the date that the check was issued.
   • Check Number: Enter the number on the check.
   • Amount: Enter the amount of the check.
   • Paid To: Enter the payee to whom the check was written.
4. For each Outstanding Receipts, enter the following information:
   • Date: Enter the date that the funds were received.
   • Amount: Enter the amount of the check.
   • Received From: Enter the person or organization who issued the check

Performing a Bank Reconciliation 

To perform a reconciliation:

• Click the Reconciliation tab to perform a bank reconciliation.
  The following information is displayed/entered in the Statement Information section of the screen:
  Opening Date: Will be set using the information from the previous screen.
  Balance: enter the opening balance from the bank statement.
  Closing Date: Will be set using information from the previous screen.
  Balance: Enter the closing balance from the bank statement.

Before continuing on this screen, there are additional tasks to complete first.

Understanding Receipts vs. Deposits

Legal Accounting provides an optional tool to help you group receipts so that they can be compared with deposits listed on your bank statement. 

If this feature is not already activated for you, it can be enabled by selecting the Enable Receipts Vs Deposits  button on the right side of the screen.

Once enabled, this feature will appear as a menu option in the tool bar. Select the Receipts Vs Deposits tab.

There are three sections on this screen:.

Deposits

The Deposits section contains items which have been deposited at the bank. Entries which have been included on a deposit slip and any electronic transfers will automatically appear here. The following information is displayed in this section:

• Deposited: The date of the deposit slip. 
• Received: The date of the receipt. 
• Reference: The identifying number of the deposit slip.
• Amount: the amount of the deposit. To expand a specific deposit, click on to the left of the entry.
  

To expand a specific deposit, click the Plus icon to the left of the entry. A detailed list of all the entries contained within the deposit is displayed.

The lock icon at the right side indicates that this deposit was made either by finalizing a deposit slip using the Deposit Slip menu option or it was made electronically. If this is incorrect, the deposit slip must be deleted and/or recreated using the Deposit Slip feature. After all deposited entries have been moved into the Deposits section of the screen, the reconciliation is ready to begin.

Unmatched Receipts

Unmatched receipts are entries that are stored in Legal Accounting, but the system does not know if, how, or when they were physically deposited at a bank. For example, checks and cash that are not on a deposit slip are examples of unmatched entries. 

This screen allows you to adjust details about how these unmatched entries were deposited at the bank. For receipts that were deposited as individual items simply click and drag the item onto the Click or Drag Receipt(s) to Add Deposit area. A single entry will appear under the Deposits section of the screen.

Legal Accounting also allows you to identify multiple receipts that were grouped on a single deposit. 

To do this:

1. Hold down the CTRL key, select all the entries in the group.
2. Drag them together onto the Click or Drag Receipt(s) to Add Deposit area. The One or Multiple deposits window appears. 
3. Select Yes if you want these entries to be listed as one deposit on the reconciliation or No if the entries are to be shown individually.
   

Receipts on Future Deposits

This section of the screen shows receipts that are dated within the date range of the current reconciliation but appear on a deposit slip dated outside of the current reconciliation. The Date of the receipt, Type , Amount , Received From and the Deposit slip reference number of each item are displayed.

Clearing Items on a Bank Reconciliation 

To check items that have been cleared on the bank statement:

1. Return to the Reconciliation tab. 
2. Use the bank statement to check items such as checks and receipts/deposits.
   
   Depending on the bank, the list of checks and deposits can be sorted by Date, Check, Amount, or Paid To by clicking the relevant heading. Entries can be sorted in either ascending or descending order.
   
   Example: Sorted by Date:
    
   Example: Sorted by Amount:
    

The Statement Reconciliation and Journal Reconciliation amounts will be adjusted by the value of each item as it is marked as cleared.

For example, the following shows the Statement and Journal Reconciliations before a $300 check is cleared (left) and then after (right). Notice that the values of Cleared Checks, Outstanding Checks, and Difference have all been adjusted by the amount of the cleared check.

Entering a Missing Deposit

To enter a missing deposit (receipt) and/or check:

1. Go to the Feeds and Reconciliation menu. 
2. Select either the Add Check or the Add Receipt  button near the top right corner of the screen.
    

Depending on the type of entry to be added, the system will display either the Operating In, Operating Out, Trust in, or Trust Out screen. Once the missing entry is input and saved, the system will return to the Reconciliation screen.

Entries can also be edited directly from within the Feeds and Reconciliation menu. Simply click on the Edit icon at the right side of the entry to be changed. Once again, the appropriate input screen will appear so that any changes can be made and saved before continuing with the reconciliation.

Inputting Bank Errors

Any bank errors which have not been cleared must also be entered into Legal Accounting before a reconciliation can be performed.

To do this:

1. Select the Bank Errors tab.
   
2. For each bank error, enter the following information on this screen:
   • DATE: The date that the error occurred (this can be found on the bank statement). 
   • AMOUNT: The amount of the error. 
   • REFERENCE NUMBER: An optional identifier provided by the bank for reference purposes which can be used to track an error. 
   • MEMO: Details about the circumstances of the error.
     
     The entries will appear in the Statement and Journal portions of the reconciliation.

The lower section is used to clear Prior Bank Errors which have been carried forward and have been corrected on the current statement.

If a Bank Error is entered incorrectly, it can be removed by clicking the Delete icon at the right side of the entry.

Finalizing a Bank Reconciliation

In Legal Accounting, it is possible to produce a reconciliation report multiple times during the course of bank reconciliation. Once all items from the bank statement have been marked cleared, the Difference will be zero. At that point, the reconciliation can be finalized

To finalize this reconciliation:

1. Toggle the Close Period option and select Generate Reports.
   
   CAUTION:  The Finalizing Bank Rec window will appear. Please refrain from doing other work in the system while processing continues.
   
2. When the status message appears on the Notifications icon on the main tool bar, click on the icon to view the message.

Once the period is closed and a report is requested, the following events will occur:

• The reconciliation is saved. A PDF of the reconciliation report is also produced. This can either be viewed onscreen immediately or downloaded and referenced later. 
• Entries marked as cleared on the reconciliation are CLR on reports. Outstanding items are labelled OUT. 
• The accounting for entries marked cleared is locked down by the system. 
• Legal Accounting will automatically set the starting date and opening balance of the next reconciliation period use the closing date balance of the current reconciliation to update.

Reading the Reconciliation Report

The Reconciliation Report is broken down into four sections: 

• BANK REC. COVER: Shows balances for the Statement Reconciliation, the Bank Journal Reconciliation, the Trust Listing, and any outstanding deposits. 
• BANK REC. STATEMENT: Lists details about all cleared entries. 
• BANK REC. JOURNAL: Shows details about all outstanding entries. 
• BANK REC. TRUST LISTING: Lists details about each file that has a balance or had a transaction of funds within the trust account during the date range of the reconciliation.

Reviewing Previous Reconciliations

Legal Accounting saves the reconciliation once it is finalized. 

To view it:

1. Navigate back to the Feeds and Reconciliation menu. 
2. Select the required bank account.
3. Press Run to load the information pertaining to it. 
4. Select the Previous Periods option.
    A list of all previous reconciliations completed for this account will appear.
5. To re-open a reconciled period, click the icon to the right of the entry.