Law firm bookkeeping
Law firm bookkeeping checklist
A law firm's books have two sides: the operating account and the client trust account. The monthly request should collect the trust reconciliation, the client ledgers, the billing and collections, the payroll and the vendor invoices. Keep the trust records separate from the operating records so the firm can prove every client's money is accounted for.
Who sends itSent by the law firm's bookkeeper after the month ends, usually by the 10th. It covers the operating account, every trust account and every timekeeper.
0 of 17 ticked
01Trust accounts
02Billing and collections
03Payroll and partners
04Operating costs
What firms get wrong
- Reconciling the trust bank account but not the client ledgers, so one client's balance is wrong.
- Paying a firm expense from the trust account before the fee is earned.
- Recording a client retainer as revenue when it is still held in trust.
- Missing the W-9 for a contract attorney until the 1099 deadline.
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Questions about this checklist
What records does a law firm need each month?
The trust account statement, client ledgers and three-way reconciliation, the billing and collections reports, the payroll and partner compensation records and the operating bank and vendor statements. The trust records are the first priority.
What is a three-way reconciliation?
It matches three numbers for the same date: the trust bank balance, the total of the client ledgers and the trust liability in the general ledger. If the three do not agree, the firm has an unreconciled trust item to resolve.
Can a law firm use one account for trust and operating money?
No. Client funds should be held in a separate trust account and withdrawn only when earned or authorized. The exact rules come from the state bar and the ABA Model Rules, and commingling can lead to discipline.
Do contract attorneys get a 1099?
A payment to an unincorporated contract attorney for services is generally reported on Form 1099-NEC when it reaches the threshold. Collect a W-9 before the first payment and check the payee's entity type.
Sources
- ABA: Model Rule 1.15, Safekeeping Property
- IRS: Publication 334, Tax Guide for Small Business
- IRS: Instructions for Forms 1099-NEC and 1099-MISC
Checked November 3, 2026. Tax rules, forms and thresholds change; confirm them with the IRS or your tax software before relying on them.
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