One of the main commonalities among all types of businesses regardless of industry is revenues and expenses. Every for-profit business is in business to make a profit by having more revenues than expenses. Another main commonality among all types of businesses is the need and importance of bookkeeping. Learn about the importance of bookkeeping for a law firm below.
What Is Involved in Bookkeeping For a Law Firm?
Bookkeeping for a law firm is somewhat different from bookkeeping for businesses in other industries, including ecommerce and retail. and ecommerce. When it comes to this type of bookkeeping, a unique aspect in a law firm’s books is IOTLA accounts. This stands for “Interest on Lawyer Trust Accounts,” which are bank accounts containing client retainers, settlement funds, and other funding that belongs to a law firm’s clients and not the law firm itself.
As with other types of bookkeeping, this type of bookkeeping will properly record the law firm’s expenses, revenues, liabilities, assets, and equity so that it be applied to forms regarding taxation, court documentation, and other required issues.
The Importance of Such Bookkeeping
Such bookkeeping needs to be done accurately so that the law firm knows whether it is operating profitably or not. The company assigned to handle this type of bookkeeping must be aware of how to properly handle IOTLA accounts, being that the funding in these relevant accounts should not be recorded as profit for the law firm, but as separate funding for the law firm’s clients. Thus, the company must know that the law firm only earns revenue from such an account when the firm has earned the corresponding fee, and record it accordingly and properly
