Interest-Bearing Trust Account Guide

Interest-Bearing Trust Account Guide

Recording Interest Earned on Trust Deposits

For brokerages that earn interest on deposits held in a trust account, there are two ways to handle and record the interest within a deal, depending on whether the interest is returned to the client or retained as brokerage income.

Scenario 1: Interest is Paid Back to the Client

If the interest earned on the trust deposit is returned to the client, follow these steps:

  1. Record the initial trust deposit using the Add Deposit menu.
  2. Add the interest earned to the deal using the Add Deposit menu. Ensure the date and amount match your bank statement, and include a reference noting that it is “interest earned.”
  3. Use the Release Funds menu to release the interest amount back to the client

Scenario 2: Interest is Retained as Brokerage (Other Income)

If the interest earned is kept by the brokerage as other income, follow these steps:

  1. Record the initial trust deposit using the Add Deposit menu.
  2. Add the interest earned to the deal using the Add Deposit menu. Ensure the date and amount match your bank statement, and include a reference noting that it is “interest earned.”
  3. Transfer the interest amount from the Trust account to your Commission Trust or General/Operating account (typically the account used for agent payments).
  4. Add the interest amount under the Other Income Allocation section on the Deal’s Allocation page.
  5. Process the deal payout. The interest will be moved from the Commission account to the General/Operating account if the “Other Income Transfer” setting is enabled in Brokerage Settings. If not enabled, please turn it on before completing the payout.

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