Legal Services Journal Entry

What Are Legal Services And The Accounting Treatment Of These Services

Legal Services are those services which are provided when there is a need of legal works such as legal requirement of a business to register, to operate, to file a case in the court for a business matter, etc. Legal services are provided by law firms, lawyers, attorneys, court of law, etc., to clients carrying on the business.

For a company’s business, the legal services are Expenses and these are recorded on the Income Statement.

The journal entry to record legal services is shown below:

For Cash / Bank

                                     Legal Services Expense a/c   XXX

                                                                                  Cash a/c / Bank a/c   XXX


                                         (Legal Services Expense Paid For Cash / Bank)

When On Account / Credit

                            Legal Services Expense a/c    XXX

                                                                        Accounts Receivable a/c   XXX


                                        (Legal Services Expense Paid On Account)

For the law firm, it is a Revenue as it provides services to the company against legal fees received from the company. So, the journal entry from the point of view of legal firm is shown below:


For Cash And On Account / Credit


                              Cash a/c / Accounts Receivable a/c  XXX


                                                                                      Legal Services Revenue a/c  XXX



                                             (Legal Fees Received from the Company)

Legal services on accrued means that the legal services are received by the company but the payment is still not made to the legal firms, then it is the Current Liability of the company to pay to firms after some period of time.

The Adjusting Entry for legal services is shown below:

                                Legal Services Expense a/c   XXX

                                                                            Accrued Legal Services a/c   XXX


                                         (Legal Services Expense for the Period)

When the company actually paid legal services expense to the lawyers, then the above adjusting entry is reversed.

Accrued Legal Services are also known as Legal Services Payable or Outstanding Legal Services.

While for a law firm it is a Current Asset as the law firm provided the services in advance to the client company, but the payment is still not received from the for legal services delivered. So, the adjusting entry will be as follows:

                                               Accrued Revenue a/c  XXX

                                                                                 Legal Services Revenue a/c  XXX

                                           (Legal Services Revenue Receivable for the period)