Lawyers Bills coming out of a lump sum bill
Hello,
I have transferred $5k to a Lawyers trust fund and any charges from the Lawyers are to be taken out of that 5k. I have created a Bill of 5k and payment to show that money coming out out of our account to reconcile, although i have a few more bills here that have come out of the 5k. How do i enter these bills moving forward what is the correct way to do this?
Thank you kindly
Lucy
Comments
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Hi Stacey,
The way I would do it would be to create an Other Current Asset account called "Pre-payments", or call it anything else you like to specify what it's for. Do a transfer to this account for the $5K, so that it comes out of your bank account. When a bill from the lawyer comes in, enter it as you normally would. Unfortunately, you cannot pay a bill from an OCA account, only a bank account, so I would use a clearing account to pay the bill and then set up a transfer to the clearing account from the prepayment account to "pay" the bill. It's a bit of mucking around, but you will be easily be able to keep track of how much of the $5K you have spent. And your GST will be accurate. HTH
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A bank account is an Asset account so you don't really need an additional, separate asset account.
I would just use the Clearing bank account. This is a "dummy" bank account that you set up to enable you to "pay" funds out of & "receive" funds into it, transferring any remaining net balance to your main bank account (if applicable) as per your actual transactions.
Create a Write Chq for the 5K - out of your actual bank account - & allocate it to your Clearing Account IMPORTANT: Do NOT enter a tax code here - this is not the "expense", it's just a transfer of funds to cover the expense(s) !):
The 5K is now sitting in the Clearing account to cover the relevant costs eg enter the Bills you receive & use the Clearing account (instead of your normal account) to pay them.
The BILLS are the expenses that need tax codes:
Pay these Bills in Pay Bills using the 5K sitting in the Clearing Account :
You can then clearly see & track the running balance of your initial lump sum trust payment v charges in the Clearing Account:
😊
Shaz Hughes Dip(Fin) ACQ NSW, MICB
*** Reckon Accredited Partner (AP) Bookkeeper - specialising EXCLUSIVELY in Reckon Accounts / Hosted ! *** Bookkeeping & 1-on-1 customised software Training/Troubleshooting ***
* Regd BAS Agent (No: 92314 015)* ICB-Certified Bookkeeper* Snr Seasonal Tax Consultant since 2003 *
Accounted 4 Bookkeeping Services
Ballajura, WA
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Thank you, Your comments and screenshots were very helpful.
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