General Ledger Accounting

  • January 01, 2002
  • Paul McLaughlin

This article is part of a six part section on finance. The pages in this section will take you through the basics of trust and general accounting, including a sample Chart of Accounts for a solo or small law firm, some comments about buying accounting software and some accounting tips.

The General Ledger 

The General Ledger ("GL") is the accounting record in which all non-trust financial transactions are posted and sorted.

Until recently, the GL was a physical book or books that were posted by hand, but law office accounting software has now replaced books in almost all law offices. The advantage of software is accuracy, speed and convenience. As well, law office accounting programs make it easy to extract the information you need to make better financial decisions for your practice.

The Chart of Accounts

The GL is divided into accounts in the chart of accounts. By convention, GL accounts are numbered as follows:

  • 1000-1999           Assets
  • 2000-2999           Liabilities
  • 3000-3999           Capital
  • 4000-4999           Revenue
  • 5000-5999           Expenses

Sample Chart of Accounts (for solo or small law firm)


1000      General Bank
1100      Accounts Receivable
1200      Furnishings & Equipment
1250      Less Depreciation


2000      Bank Loan/Line of Credit
2100      Business Credit Card
2300      Net GST Payable
2400      Employee Withholdings


3000      Capital Contributions
3100      Draws 


4000      Fees 
4100      Interest


5000      Auto
5010      Bad Debts
5020      Business Promotion/Marketing
5030      Disbursements
5040      Insurance 
5050      Interest/Bank Charges 
5060      Library/On-line Research Charges
5070      Maintenance and repairs
5080      Office Supplies
5090      Phone
5100      Professional fees
5110      Rent
5120      Salaries/Benefits
5130      Taxes
5140      Travel
5150      Sundry


  1. There is no magic to this particular chart of accounts; it is intended to cover the most obvious assets, liabilities, capital accounts, revenue accounts and expenses in the typical solo or small firm. You should feel free to add to or subtract from the list as you see fit. The goal is to sort the raw information into the categories you need for your decision-making.
  2. Likewise, there is no magic to the numbers given to the accounts, though they do follow the normal convention and will be recognized as such by your accountant.

The Profit and Loss Statement

The Profit and Loss Statement (or P&L or Operating Statement) is the most important non-trust accounting record in a solo or small law office. It shows what has happened in each revenue and expense account during a fiscal period-a month, a year or the current year to date. It usually has the current and comparative figures from a previous period. It may also show variances from the budgeted targets. You use this statement to track the profitability performance of your practice on a month-to-month and year-to-year basis.

The Balance Sheet

The Balance Sheet shows the relationship between the Assets, the Liabilities and the Capital of your business. It is important as a snapshot of the financial health of the practice. It can be used to analyze changes in bank balances, accounts receivable, debt, assets and working capital. In a partnership, the Balance Sheet is important because it shows the capital accounts, which record the relative positions of the partners with respect to withdrawing money from the partnership.