The video “Legal Accounting Basics” overviews the basics of legal accounting. It is perfect for anyone interested in learning more about this field.
Legal accounting is the process of handling and recording a law firm’s financial transactions like billable hours, revenue, cash flow, accounts receivable and payable, salaries, and payroll taxes, among other duties. It consists of a variety of activities.
The first is general ledger preparation and posting. A general ledger is a book containing a company’s financial report. In legal accounting, it is made up of individual accounts within the larger bookkeeping system.
The second activity is account reconciliation. Account reconciliation means comparing financial records to those outside sources of information. Reconciliation is necessary because it keeps records up to date and allows analysis of financial transactions.
One of the most important parts of legal accounting is the third activity, cash flow analysis. Cash flow analysis is essential because it shows how much cash flows in and out of an organization. Law firms also use it to determine the profitability of an organization and predict future cash needs.
The responsibility for legal accounting falls on a few individuals within a law firm. These individuals are called accountants, bookkeepers, auditors, and lawyers. The responsibility of the legal accountant is to maintain accurate records of all transactions handled in a law firm.