The Reconciliation That Was Two Dollars Out
Dev is completing a bank reconciliation for a small accounting firm's trust account at month end. The trust account holds client money. The bank statement balance is $184,220.15 and the trust ledger total is $184,218.15 - a $2.00 difference. Dev's supervisor, Helen, is leaving early for a family matter and says: "It's two dollars. Just write it off to sundries and finish the reconciliation - we can't hold up the month-end over a coffee." The firm's trust account procedure says all discrepancies must be investigated and documented before the reconciliation is signed, and that unexplained differences must not be posted to a suspense or sundries account. Dev notices the difference first appeared in the same month a new staff member started processing receipts, and there is one receipt on the statement dated the 31st that does not appear in the ledger.
1. Why is writing off the $2.00 the wrong call, even though the amount is trivial?
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The amount is trivial; the principle is not. This is a trust account, which means the money belongs to clients, not the firm. Trust account rules exist precisely because small unexplained differences are often the visible edge of a larger problem - a misposted receipt, a duplicated entry, a receipt recorded in the wrong client's ledger, or a timing issue that will compound next month.
Writing the difference to sundries would do three harmful things: it would destroy the evidence that something is wrong; it would breach the firm's own procedure, which expressly prohibits posting unexplained differences to a suspense or sundries account; and it would create a false reconciliation - the signed reconciliation would assert the account balances when it does not. If the underlying error is a client's receipt allocated to the wrong ledger, another client's balance is also wrong, and the $2.00 is a symptom of a misallocation that could be much larger.
Helen's time pressure is real, but the correct response to a deadline is to document the unresolved item and escalate, not to close the reconciliation as if it were resolved.
2. What investigation should Dev carry out, and what should the reconciliation note say if the difference cannot be resolved before month end?
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Dev should investigate in a logical order:
- Trace the 31st receipt on the bank statement to the ledger. If it is missing from the ledger, that likely explains the difference and may be a timing or cut-off issue - check whether it was recorded in the next period.
- Check the new staff member's receipts for transposition or duplication errors, since the difference first appeared in that month.
- Check for bank fees or charges not yet recorded, and for any receipt recorded twice or in the wrong client ledger.
- Recompute the ledger total to rule out an addition error.
If the difference is identified and corrected, document the correction and the reason. If it cannot be resolved before month end, the reconciliation note should state the amount of the unresolved difference, the steps taken, the items still outstanding (including the 31st receipt), who is investigating, and that the reconciliation is not finalised pending resolution. It should not be signed as complete. Dev should escalate to Helen's manager or the trust account principal, because a trust account discrepancy is not something to leave undocumented over a weekend.