Best Way to Use a Lawyer's Trust Account in Quicken H&B

I run a solo law practice and I use Quicken Home and Business. I have a single operating account and a single trust (i.e., IOLTA) account. When a client pays me a retainer, I deposit it into my trust account. I then perform the services, and I accrue those services on an invoice created for the client. When the work is done, I finalize the invoice and bill it to the client.

I don't have a good way to reflect these transactions in Quicken Home & Business. First, what's the best way to categorize the retainer fee into my trust account? Second, from which account should I show the invoice being paid? When you pay an invoice, you have to pick an account into which the deposit is made. Well, the money is already in the trust account, so you can't tell the invoice to deposit the money there. The only place I can think of is to direct the invoice to deposit the money into my operating account and then create a transfer from my trust account to my operating account to cover it (a transfer, I might add, that is not reflected in Quicken).

It seems like there is a better way to reflect all this in Quicken. Any help beyond suggesting I should use QuickBooks?


  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    edited August 2021
    Since I don't use the Home and Business version of Quicken the actual mechanics of the proper accounting using that product aren't exactly clear to me, although the correct overall accounting is clear.
    When you deposit the money in the trust Account the correct, real world accounting entry is:
    Debit (increase) Cash in Trust Account             $XXX   (money deposited in a checking account)
    Credit (increase) Deferred Revenue Account   $XXX  (liability to perform services for client)
    Then when you perform the work and create the invoice the accounting is:
    Debit (decrease) Deferred Revenue Account  $YYY   (bill for services rendered)
    Credit (increase) Legal Fee Revenue Category          $YYY   (income)
    I seem to recall - and I may be wrong here - that the invoicing process in Quicken H&B requires that the "cash received" when a customer/client pays an invoice must be taken out of a Checking/Cash Account so to make this work in Quicken you might need to make that Deferred Revenue Account, (an Account that's properly, from an accounting standpoint, a "liability"), into some sort of Cash/Checking Account.
  • memurray67
    memurray67 Member ✭✭
    I am a solo also and use Quicken.  I'm still trying to figure things out, though. I initially tried Quickbooks but I did not like it.  I have a Trust bank account and an operating account. My monthly reconciling of bills and trust fund and payments is manually extensive but it is clear and concise.  I created a trust Category and a Legal Fees Received category (client expenses category too).  When I get a trust payment, I create a subcategory under the Trust category for that client for example, (Trust:01925-Smith) and enter the deposit in my trust account using that subcategory.  The heavy manual part comes when I bill and pay out of trust.  I do a bank transfer for each client from IOLTA to operating accounts.  In the Trust account in quicken, I enter a payment with the client's trust subcategory.  I then enter a deposit in the operating account using either the legal fees received subcategory, the client expenses subcategory, or both.  I am able to quickly verify my trust account balance and each client's trust account balance by comparing with my practice management software.

    I welcome any recommendations that would reduce the manual work load.
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