How to Handle Wire Fees Charged to Trust Bank Accounts: A Step-by-Step Guide for Bookkeepers
May 22, 2023As a bookkeeper working with attorneys or law firms, it's common to find wire fees charged to trust bank accounts. For example, let’s imagine one day, you're reconciling the bank account and notice that a wire fee of $50 has been charged to the trust bank account. You start wondering how to handle this fee so that the bank and trust liability accounts remain balanced.
Knowing how to handle wire fees charged to trust bank accounts is vital as a bookkeeper. Here's a step-by-step guide to help you understand how to do it:
- Create a sub-liability account called "bank/wire fees to be reimbursed" under the parent account for the funds held in trust. This account will help you keep track of the fees that need to be reimbursed.
- When you see a wire fee charged to the trust bank account, book it to the "bank/wire fees to be reimbursed" account. This will ensure that the bank account and trust liability account remain balanced.
- Instruct the attorney to transfer funds from the operating account to the trust account to reimburse the withdrawn funds.
- To record the transfer, make a two-journal entry transaction:
- Debit the trust bank account
- Credit the trust liability account to show the reimbursement.
- Credit the operating bank.
- Debit bank fees reflect the funds leaving the operating account and the law firm incurring the expense.
As you can see, the trust liability account, “bank or wire fees to be reimbursed,” is a clearing account and should be zero since it is a holding account until the client reimburses the bank account for the operating expense.
Following these steps, you can easily handle wire fees charged to trust bank accounts. If you need more help with Legal Accounting, enroll in our course, "Fast Track Legal Accounting," or join our mastermind group to discuss topics like this and more. Remember, as a bookkeeper, staying ahead of the curve in your accounting skills is key to success!
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