Updated: Oct 13, 2021
Simply explain - in a few words
What is the Three-Way Escrow Bank Reconciliation?
In the United States, every state bar association and insurance underwriter requires that an attorney and real estate title agents, reconcile their Escrow, IOLTA, or Trust bank statement to their client’s individual balances either monthly or quarterly, this process is what is known as Three-Way escrow reconciliation.
A three-way escrow reconciliation differs from a two-way bank reconciliation because it provides a third component to the reconciliation process. The three components are the trust ledger (Book Balance), the trust bank statement (the Summary Reconciliation report), and the client ledger (the Trial Balance). These three components end of monthly balances must match.
Each transaction on an escrow bank account, a deposit or withdrawal, must be allocated to a specific client ledger. Each client ledger must show all the funds that come in versus all the funds that come out. Each client ledger separately shows the available funds that belong to each of the clients (Summary Trial Balance) and the total sum of all the client ledgers represents the bank statement reconciliation balance. The book balance is acquired through the registry ledger, where all transactions, in and out are registered.