The three balances that have to agree, the exceptions that break them, what your state expects you to keep, and a checklist you can print. Written for auction houses and estate-sale companies that hold consignor money.
A trust (escrow) account holds money that is not yours: buyer payments waiting to be settled and consignor proceeds waiting to be paid out. Your commission is the only part that ever belongs to the business. Most state auction boards do not ask you to file anything periodically — they reserve the right to examine the account whenever they choose, and several spell out what the records must look like:
Whatever your state says, the practical test is the same: on any day, can you show that the money in the bank equals what you owe consignors, and explain every dollar of the difference? Doing that once a month, while the deposits and checks are fresh, is far cheaper than doing it under examination.
A bank reconciliation proves your checkbook matches the bank. A trust reconciliation has to prove one more thing: that the money in the account is fully explained by what you owe. So three figures are compared, not two.
Try the free three-way check calculator →
1 = 2 = 3 → IN BALANCE. Anything else → OUT OF BALANCE, with a reason for every dollar.
If 1 ≠ 2, something hit the bank that is not in your records, or vice-versa (a fee, a wire, a deposit you never entered). If 2 ≠ 3, your records are internally inconsistent — a consignor was over- or under-paid, or money is sitting in the account with no owner. Both need a named explanation, not a plug figure.
Almost every out-of-balance month comes down to one of these. Each has a name, a usual cause, and a right response.
| Exception | What it looks like | What to do |
|---|---|---|
| Disbursement mismatch | A consignor check cleared for $27,700.00; the settlement says $27,200.00. | Overpayment — recover it or document the correction. Underpayments are owed immediately. |
| Unmatched receipt | A $20,000.00 deposit with no auction or buyer behind it. | Find the source before it sits in trust. Money with no owner is the first thing an examiner asks about. |
| Unmatched disbursement | A $2,950.00 wire to the operating account with no settlement authorising it. | The classic commingling finding. Return it or document the commission it represents, with the settlement that supports it. |
| Unauthorized deduction | A consignor was paid less than the settlement, with no fee or adjustment on record. | Pay the difference or record the agreed deduction on the settlement. |
| Bank fee taken from trust | A $95.00 monthly service charge. | Reimburse trust from operating, or record it and reduce the fee at the bank. Fees must not come out of consignor money. |
| Stale funds | A consignor balance still unpaid months after settlement; an uncashed check. | Re-issue or escheat per your state's unclaimed-property rules. Do not let it net against other consignors. |
| Timing items | Deposits in transit, outstanding checks at month-end. | Normal — list them. If the same item is still outstanding next month, it stops being a timing item. |
| Missing period | An auction's settlements aren't in this month's records. | Add the settlement export. Its deposits and checks are otherwise "unexplained". |
The rule that keeps you out of trouble: flag, don't guess. A plug entry that makes the numbers agree is worse than an honest exception, because it hides the thing an examiner is looking for.
Retention: at least two years is the floor in Texas; several states say three or five. Keep the whole set for the longest period any rule that applies to you names, and keep it where a consignor dispute can find it.
Print this page (the header and footer drop out) and tick it off each month.
It proves your books match the bank (balances 1 and 2). It does not prove that what is in the bank is fully owed to identifiable consignors (balance 3). That third comparison is what makes it a trust reconciliation.
Earned commission should move to operating promptly and be documented against the settlement that earned it. Leaving it in trust muddies balance 3; sweeping it out without a settlement to point at is the unmatched-disbursement exception above.
Record it as out of balance with the difference and what you checked. An honest open item, resolved next month, is defensible. A plug is not.
Done by hand across three exports, an afternoon. With the records already in the shape your software exports them, SaleLedger runs the three-way check and writes the exception list in minutes — you make the decisions.
Bring in the settlement export, the QuickBooks file and the bank statement. It computes the three balances, names every exception in plain English, writes the check register and keeps the history — on your own computer. $129.00/month, first 30 days free, cancel any time.