Trust Accounting: General Journal Entries for expenses using accrual accounting?

You don't use Journal Entries when customer and vendor names are required as part of the transactions. You use the real functions:

Enter Bill - this is how you will enter that services or goods were purchased from others. You can use Write Check, if you paid it at the time of the service. Otherwise, Enter Bill is followed at a later date by Pay Bill.

Either method works for you to enter on the Expenses or Items tab, then select the client's name, and the checkmark indicates Billable to the client.

The Trust account is not an Asset, it is a bank account.

The Liability account is the offset for amounts in the trust bank account.

Once entries are billable back to clients, you can use Statement Charge or Invoice. Both methods allow you to use Add Time & Costs, and pick up the entries marked billable to this client. Using an Invoice allows you to pick up all the pending charges onto one form that is dated for due date tracking. Statement charges and invoices both hit AR.

Then, you have open charges in AR for the client. Here Laura and I have differing methods for satisfying the AR with trust funds and reducing the liability account. Laura likes to write a check in QB from the trust account, made payable to the client, using the liability account on the expenses tab. On the actual check, make it payable to the firm. Use it to Receive Payment for the client name against the invoice or open charges.

I use an Other charge type of item to manage liabilities. You can read about this in the Help system. Search on Trust accounts, Customer Deposits or Prepayments or Retainers.

As long as every transaction that hits the liability account has the client name associated with it, you have an auditable account.

I would not enter bills for client expenses which are paid out of trust funds.  If the trust funds are there, simply pay them.

Keep it simple.

Laura D

For any transaction in QB, open it. Then, use Ctl+Y to see the journal view of the data flow.

Trust accounting in QuickBooks is a little tricky and needs to be tracked using specific procedures in order to get good reporting for the Funds Held in Trust (escrow) detail by client.

Here is my general procedure for tracking trust accounts in QuickBooks -

Deposit the retainer/settlement check into the Trust/Escrow bank account, using a Funds Held in Trust (Escrow) liability account with the client name in the name field. I do this directly in the Make Deposit form, but you can enter a sales receipt, using an item which points to the liability account.

Then, write checks for any (non-law firm) disbursements of those funds, using the Funds Held in Trust (Escrow) account on the expense tab of that check - with the client name in the name field on that line. Or, if you want the detail of how those disbursements are made, create separate items, all pointing to that account, to indicate what that 'paid out' is for - Insurance, taxes, fees, etc.

Then, if applicable, invoice the client. . .for the professional fees (time or flat fee billings) and any advanced costs (previously paid out of the operating account) as separate items. . .

Then, cut a check from the Trust/Escrow bank account to the law firm, using the Funds Held in Trust (Escrow) account on the expense tab of that check - with the client name in the name field on that line.

Then, 'Receive payment', using the client name, and attach that payment to the open invoice.

Then, deposit the funds into the operating checking account, either directly from the payment, or via Undeposited Funds.

I have created a group of memorized reports to show the client trust activity and balances to use when reconciling/reporting client balances and/or the bank statement.

_I do not (usually) use items, invoices, or sales receipts for any activity directly involving the trust funds (although sometimes it is needed/useful, but needs to be setup and tracked specifically).

These are two completely separate areas of your business and the transactions need to be recorded as such. . .so much so that some law firms track their trust accounting in a separate QuickBooks file (although I don't see the need for that myself).

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Review the above procedure(s) step by step.

If you still need help, you might want to contact someone directly for personal help.

Many of us do this as a business and could be contacted via the info on our websites or profiles.

I hope this helps,

Laura D