Setting Up a Law-Firm Chart of Accounts in QuickBooks Online

QBO can work well for attorneys—if your chart of accounts matches law-firm reality. Start with:

• Income: Fees (by practice area if needed), Reimbursed Client Costs.
• COGS/Direct Costs: Client costs advanced (if you treat as expense) or a Current Asset (if you track as reimbursable).
• Operating Expenses: Payroll/contractors, subscriptions, malpractice insurance, marketing, etc.
• Balance Sheet:
  • Trust/IOLTA Bank (separate from operating).
  • Client Trust Liability (matches trust bank in total).
  • Client Cost Advances (Asset) if you capitalize costs until reimbursement.

Crucial mapping: trust bank activity should never hit income/expense directly. Use client sub-ledgers (via your practice management system) and ensure monthly three-way reconciliation ties the trust bank, client ledgers, and master ledger. Build your reports so reimbursed costs flow to income properly without inflating fees.

The payoff: cleaner financials, accurate taxes, and audit-ready trust compliance with less end-of-year cleanup.