Otherwise, these funds may be maintained in either a trust account or a business account. An attorney has an ethical obligation to refund unearned legal fees or unspent advanced costs to a client whenever the attorney completes or withdraws from representation, or the attorney is discharged by the client. A basic trust accounting system consists of a trust receipts journal, a trust disbursements journal, and a trust ledger book containing the individual ledger accounts for recording each financial transaction affecting that client's funds. Each individual client ledger account should be maintained as a separate page in the attorney's trust ledger book. At a minimum, each ledger account should reflect the date, source, and a description of each item of deposit, as well as the date, payee, and purpose of each withdrawal.
Many practitioners use a manual system consisting of handwritten journals and ledgers.
There are also computer software packages available for law office trust accounting. Whether it be a trust account or a business account, each should be maintained daily and accurately. All source documents such as duplicate deposit slips, bank statements, canceled checks, and check stubs must be preserved for seven years. An attorney should also preserve copies of records from client files that are necessary for a full understanding of the lawyer's financial transactions with a client. A running balance must be maintained at all times for all ledgers and checkbooks.