Handling bank interest in a Client/Trust Account

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For our Asia-Pacific customers, the term "Trust Account" is used, while European customers refer to it as "Client Account". It's important to mention that the Client/Trust Accounting functionality does not apply to customers in North America. For further information on regional terms, check out our Glossary of Regional Terminology.

 

This article gives you a comprehensive tutorial on how to accurately record bank interest in your Client/Trust Account using the Re-Leased platform. We'll guide you through several methods to ensure that your financial records reflect bank interest correctly and maintain the integrity of your accounts.

Considerations: you may wish to set up a chart of account specifically for handling bank interest transactions.

Understanding Bank Interest Allocation

Accurately posting bank interest is important for maintaining your financial records. Whether you need to distribute interest across multiple ledgers or assign it to a specific account, Re-Leased offers several flexible options to manage this process effectively. Here are three approaches you can take:

 

Option 1: Distributing Interest Across Multiple Ledgers

For those times when bank interest needs to be allocated to different ledgers:

  1. Produce an Income Invoice in Re-Leased.
  2. Detail the split across the required ledgers as separate line items, indicating the specific amount for each ledger.
  3. Ensure the total of the invoice matches the amount received in the bank account.

This method allows for clear tracking of interest income across various accounts within your Client/Trust Account.

 

Option 2: Creating a 'Bank Interest' Ledger

If you prefer to pool the interest in one place:

  1. Create a ledger specifically named Bank Interest.
  2. When interest is earned, issue an Income Invoice for the total amount to be credited to this new ledger.

You can decide later how to manage these funds, or simply let the balance grow over time. You may wish to set up a contact under your banking provider's name for use when creating the income invoice.

 

Option 3: Using a Suspense Ledger for Immediate Transfer

For immediate interest income transfer out of the Client/Trust Account:

  1. Post the interest income to the Suspense Ledger using an Income Invoice.
  2. When the funds are transferred out, record this payment also in the Suspense Ledger.
  3. Resolve both transactions against each other to resolve the movement of funds.

This tactic is especially useful when the interest is not intended to remain in the Client/Trust Account.

 

 

By utilizing one of these methods, you can confidently manage bank interest within your Client/Trust Account using Re-Leased. Choose the approach that best suits your accounting practices and ensures a seamless financial recording process.

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