How to Record a Client Retainer Receipt (Trust Account)
Recording the receipt of an unearned retainer from a client into a restricted IOLTA/Trust bank account.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Restricted Cash - Client Trust Account | Asset (+) | 5,000.00 | - |
| Client Trust Liability (Unearned Retainers) | Liability (+) | - | 5,000.00 |
💡 Accountant's Note
When a client pays a retainer, the money has not yet been earned by the firm. Under state bar rules and GAAP, this money must be placed in a separate Trust account. It remains an asset of the client, and the firm records a corresponding liability. The firm cannot use this cash for payroll or rent until it is officially 'earned' through billable work.
Practitioner & Systems Framework
💻 ERP Architecture
In legal-specific software (Clio, MyCase, or CosmoLex), this transaction must be tagged to a specific 'Matter ID.' The Trust ledger must always be reconcilable by individual client, not just in total.
⚠️ Audit Flags
Negative trust balances. An individual client's trust sub-ledger should never be negative; if it is, it implies the firm used another client's money to pay for that case.
📄 Required Documentation
Bank deposit slip, Retainer Agreement, and the Client Ledger report.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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