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The procedure for setting up a lawyer's trust account in QuickBooks Online (QBO) is similar to other versions of QuickBooks or other brand accounting software. Only since QBO is the newest and fastest growing platform, this post with modified instructions from Intuit details the procedure step by step. This blog postal service does not address the legal requirements of trust bookkeeping that vary in different jurisdictions just rather only addresses the generic mechanical steps within the accounting system. This post assumes that the law business firm has already modified its QuickBooks account settings to change "customers" to "clients".

1. Set upward the trust/retainer business relationship

Begin past creating a liability business relationship to track the amount of the retainer you received from your client. You must first decide whether you are using a seperate account for each client matter or whether one trust account will exist used for multiple clients. This is a legal matter, not an accounting matter so this is non discussed here.

Choose the Gear Icon > Nautical chart of Accounts.
At the pinnacle of the screen, click New.
Select Other Current Liabilities* under Category Blazon.
Select Trust Accounts – Liabilities** under Detail Type.
Type in the name you want; for example: Trust Liabilities.
Click Save.

Adjacent, create a servant particular you tin can use to receive the deposit or retainer from your customer: Choose the Gear Icon > Products and Services.
Click the New button.
If prompted to select a blazon of particular, choose Service.
In the name box, enter a name for the product or service detail (for instance, Retainer).
Click the Income Account drib-downwardly arrow and select the Trust Liability Account.
Click Save.

two. Gear up a trust liability depository financial institution account in QuickBooks.

If yous need to create a trust liability depository financial institution account: Choose the Gear Icon  > Nautical chart of Accounts.
At the top of the screen, click New.
Select Bank Account* under Category Type.
Select Trust account** under Item Type.
Enter the name you desire (for example: Trust Liability Bank Business relationship) or leave the account name as is.

three. Receive a retainer or deposit from your client

Most businesses would receive the retainer through a sales receipt: Click on the "+" icon.
Select Sales Receipt.
Select your client.
Add the retainer or deposit particular you set up earlier to your Sales Receipt and ready its Rate or Amount to equal the amount of money you lot're receiving for this retainer or eolith.
Utilize the Deposit To dropdown to select a bank business relationship. If you created a separate trust liability banking concern account, select that account now.
Otherwise, select your general trust account.
Salve the Sales Receipt.
In addition to adding this money to the chosen bank account, this also increases the amount in your liability account. This shows that the money isn't truly yours yet and avoids treating it as income until later.

If your business prefers to invoice the client for their deposit rather than receiving it then and there, you can exercise that every bit well. The steps are the aforementioned every bit above except that you'll make an invoice instead, and you won't select a  Deposit To account right abroad. Instead, you'll make that choice when you receive payment against this invoice.

iv. Utilize the eolith or retainer to pay for a customer's invoice

When it comes time to charge the client for services you perform for them, you'll plough the retainer you lot received into credit on an invoice and receive it like a payment: Create an invoice for your client that lists the services or appurtenances provided.
On the last line, enter the Retainer Item in the Product/Service field.
Enter the retainer amount as a negative, which subtracts it from the invoice.  You cannot enter a servant amount greater than the invoice full as an invoice tin can accept a zip total, merely not a negative one.
Click Save and Shut.
This decreases the corporeality in your liability account and applies the credit to your customer's invoice, which turns it into income. The money is at present yours.

If you lot created a separate trust liability bank account to hold the retainer, you lot at present need to transfer that money to your operating bank account: Click the "+" icon at the top of the screen and, under other Other, select Transfer.
In Transfer Funds From, select your trust liability banking company account.
In Transfer Funds To, select your operating banking company account.
Enter the amount that you just received as payment for the invoice.
Click Save and Close.
This shows that the money has been moved out of the special trust account and into your business's ain account.

5. Run a report to see the retainer amounts remaining for each customer

Information technology is important to cheque how much retainer or eolith you're holding for each client, yous can use this report:

Run a Residue Sheet report, changing the report period to All Dates.
In the Liabilities section, locate your trust liability account.
Click on the corporeality shown next to information technology to drill into that account.
Click Customize > Rows/Columns.
Set Group Past to Customer.
Click Run Report.
Yous can now run into each client'south retainer or deposit remainder, as well equally a record of transactions that accept afflicted this balance. If you lot don't need to see as many transactions, you tin change the report menstruation to a more contempo date range, or click the minor triangle next to the customer'southward name to hide them.

You might wish to use the  Save customization button so that y'all can admission it in the future from the  My Custom Reports page.

half dozen. Pay client expenses using the retainer

In some cases, a business organization might need to pay for customer expenses using the money held in the liability account. For example, a police firm might receive a settlement from a court, pay for a client's medical expenses, and and so pass the remainder on to the customer.

Because these expenses shouldn't show on the Profit and Loss, you'll accept to create a special item to track them: Choose the Gear Icon > Products and Services.
Click the New button.
If prompted to select a type of detail, cull either Not-Inventory or Service.
Requite it a name that describes what the retainer is existence used for (e.g. Medical expense, Cyberspace settlement, etc.).
Uncheck the box next to I sell this product/service to my customers.
Set the Expense Business relationship dropdown to your trust liability account.
Save your item.

You lot'll likewise demand to check that you have Track Expenses and Items by Client enabled: Click the Gear Menu.
Select Account and Settings (or Visitor Settings).
Select the Expenses tab.
If Track expenses and items by customer is not checked, click on it and and then identify a cheque mark in the box next to it. This volition allow you lot to track this transaction and its effect on your client's retainer.

When you pay the expense: Click the "+" icon and select Expense.
Choose your payee. This could be 1 of your vendors- like another company or business. If y'all are creating this expense and then that you can give all or part of the retainer to your client (for example, when the law house needs to pass the cyberspace settlement on to their customer), so y'all should select them equally the payee.
Select a depository financial institution account to pay from. If you lot have a divide trust bank business relationship, select that. Otherwise, apply your main operating account.
Aggrandize the Detail details section and select the item you lot created earlier.
Set the Customer driblet down next to that particular to your customer'south proper noun.
Enter the amount of the expense in the Amount cavalcade for that item.
Save the Expense.

This reduces your liability account and your chosen depository financial institution account- without affecting any of your business's expense accounts since these are not expenses of your business.