Bank account balances, whether trust or business accounts, appear as assets on the balance sheet. The total amount of assets recorded on the left side of the balance sheet must always equal the total amount of equity and liabilities shown on the right side.

When your firm deposits a client [simple_tooltip content=’A retainer fee is an amount of money paid in advance by a client to assure your services will be available to them for an extended amount of time. The client pays a lump sum upfront, or makes a recurring monthly payment, and you work with them on a long-term project, or provide them with access to services each month.’]retainer[/simple_tooltip] or [simple_tooltip content=’Money that you pay to a person or company before receiving something such as a services or products.’]advance fee deposit[/simple_tooltip] into a trust bank account, the trust’s asset balance goes up on the balance sheet. This means that an equity or a liability balance must go up by an equal amount in order to ensure that the balance sheet remains in balance.

Equity account balances increase when the owner’s share of the assets increases.^[1] Liability account balances increase when the company owes money to a non-owner.^[2] Because trust funds deposited into the trust account belong to, and are owed to the client (a non-owner) until earned, the client’s trust funds are recorded as a liability on the balance sheet.^[3]

References

1. What is owners equity?
2. What are Liabilities?
3. Liabilities