Unity® Accounting Accounting Methods

The accounting method you use determines how revenue and expenses are recorded in Unity® Accounting. Two accounting methods are provided for firm operating in Canada and four accounting methods for firms operating in the United States – two methods of accrual accounting (Canada & US) and two methods of cash-basis (US only) accounting. The method you choose depends on how your firm records revenue and expenses and on the country in which your firm operates. Your accountant will be able to determine which method is best for your firm. You must select the appropriate accounting method before you begin data entry and during the initial setup.

Accrual-basis accounting

In the accrual method, revenue is recorded when it is earned and expenses are recorded when they are incurred. Bill are recognized as expenses when you receive them rather than when you pay them. You can record billings as revenue, or unbilled time (work in progress) as revenue. If you record billings as revenue, revenue is recorded when you enter bills. If you record work in progress as revenue, revenue is recorded when you enter fees using the Time Entry program.

Cash-basis accounting

In cash-basis accounting, revenue is recorded when it is received and expenses are recorded when they are paid. For example, bills are recognized as expenses when you pay them, not when you receive them. Firms using cash-basis accounting typically do not record accounts receivable, accounts payable, or accrued expenses. Cash-basis and modified cash accounting do not apply to firms operating in Canada.

To determine which accounting method is in use, select the Accounting tab on the Global Settings screen. ‘My accounting method is’ code indicates the accounting method that is in use.

Revenue Type Code	Accounting method	Available In
Unbilled as Revenue	Accrual, with unbilled fees (work in progress) recorded as revenue	Canada / USA / Int’l
Billed as Revenue	Accrual, with billings recorded as revenue	Canada / USA / Int’l
C	Cash accounting	USA / Int’l
M	Modified cash accounting	USA / Int’l

The program’s automatic journal entries are based on your accounting method.

Important: Accounting method cannot be changed after you begin entering transactions.

Accrued – Unbilled Fees as Revenue

This topic lists the general ledger control accounts for systems that use accounting method W – Unbilled Fees (WIP) as Revenue. Review this section so that you can configure your Chart of Accounts correctly.

Control account	Default	Description
Client Funds in Trust	2075	Liability account used to record the total amount of funds for all clients/matters in all trust accounts.
Professional Fees Revenue	4005	Revenue account in which professional services (fees) revenue is recorded.
Unbilled Fees (WIP Fees)	1070	Asset account in which daily time entries are recorded.
Unbilled Disb (WIP Disb)	1075	Asset account in which daily disbursements are recorded.
A/R Fees	1045	Asset account used to record billings for professional fees.
A/R Disbursements	1050	Asset account used to record billings for disbursements.
A/R Fee Write- offs	5400	Revenue reversal or expense account used to record write-offs of A/R fees.
A/R Disbursement Write-offs	6200	Revenue reversal or expense account used to record write-offs of A/R disbursements.
Unbilled Fee Write-offs	5405	Revenue reversal or expense account used to record write-offs of WIP fees.
Unbilled Disbs Write-offs	6205	Revenue reversal or expense account used to record write-offs of WIP disbursements.
Fee Variance	4007	Revenue reversal or expense account used to record the difference between WIP fees and the amount of fees billed.
Billing Variance Revenue	4015	Revenue reversal or expense account used to record the difference between WIP disbursements and disbursements billed.
Retained Earnings	3520	Account to which revenue and expense accounts are closed out at year-end.
Accounts Payable	2015	Liability account used to record payables.
GST/HST Input Credits	2053	Receivable account used to accrue Tax 1 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 1 Collected. Depending on the tax laws in your state or province you may not need to use this account.
GST/HST Billed/Collected	2054	Liability account used to accrue Tax 1 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
PST/QST Billed/Collected	2056	Receivable account used to record Tax 2 amounts paid to the government and then written off. Depending on the tax laws in your state or province, you may not need to use this account.
PST/QST Credits	2057	Liability account used to accrue Tax 2 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Anticipated Disbursements	6050	Expense account used to record anticipated disbursements posted from Create Pre-Bills & Bills. Currently not used.
Trust Clearing	1400	Account in which trust checks are recorded if you enter trust transfers to pay A/R and trust checks using the Create Bills program. Write a receipt to deposit the amount to your general bank.
Retainer Liability	4008	US Only – Liability account in which client retainers are recorded. Will not be displayed in a Canadian system.

Accrued – Billed as Revenue

This topic lists the general ledger control accounts for systems that use accounting method B – Billings as Revenue. Review this section so that you can configure your Chart of Accounts correctly.

Control account	Default	Description
Client Funds in Trust	2075	Liability account used to record the total amount of funds for all clients/matters in all trust accounts.
Time Equity	1071	Equity account to which professional fees are entered prior to billing.
Unbilled Fees (WIP)	1070	Asset account in which daily time entries are recorded.
Unbilled Disb (WIP)	1075	Asset account in which daily disbursements are recorded.
A/R Fees	1045	Asset account used to record billings for professional fees.
A/R Disbursements	1050	Asset account used to record billings for disbursements.
A/R Fee Write-offs	5400	Revenue reversal or expense account used to record write-offs of A/R fees.
A/R Disbursement Write-offs	6200	Revenue reversal or expense account used to record write-offs of A/R disbursements.
Unbilled Fee Write-offs	1071	Revenue reversal or expense account used to record write-offs of WIP fees.
Unbilled Disbursements Write-offs	6205	Revenue reversal or expense account used to record write-offs of WIP disbursements.
Billed Fees Revenue	4005	Revenue account used to record professional fees revenue generated when billing.
Billed Disbursements Revenue	4015	Revenue account used to record revenue generated when billing client disbursements.
Retained Earnings	3520	Account to which revenue and expense accounts are closed out at year-end.
Accounts Payable	2015	Liability account used to record payables.
GST/HST Input Credits	2053	Receivable account used to accrue Tax 1 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 1 Collected. Depending on the tax laws in your state or province you may not need to use this account.
GST/HST Billed/Collected	2054	Liability account used to accrue Tax 1 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
PST/QST Credits	2057	Receivable account used to record Tax 2 amounts paid to the government and then written off. Depending on the tax laws in your state or province, you may not need to use this account.
PST/QST Billed/Collected	2056	Liability account used to accrue Tax 2 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Trust Clearing	1400	Account in which trust checks are recorded if you enter trust transfers to pay A/R and trust checks using the Create Bills program. Write a receipt to deposit the amount to your general bank.
Retainer Liability	4008	US Only – Liability account in which client retainers are recorded. Will not be displayed in a Canadian system.

Cash-based – Cash accounting

This topic lists the general ledger control accounts for systems that use accounting method C – Cash accounting. Review this section so that you can configure your Chart of Accounts correctly.

Control account	Default	Description
Client Funds in Trust		Liability account used to record the total amount of funds for all clients/matters in all trust accounts.
Fees Revenue		Revenue account in which professional services (fees) revenue are recorded.
Client Expenses		Expense account in which daily disbursements are recorded.
Billed Disbursements Revenue		Revenue account used to record revenue generated when billing client disbursements.
Retained Earnings		Account to which revenue and expense accounts are closed out at year-end.
Accounts Payable		Expense account used to record payables.
Tax 1 Credits		Receivable account used to accrue Tax 1 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 1 Collected. Depending on the tax laws in your state or province you may not need to use this account.
Tax 1 Billed/Collected		Liability account used to accrue Tax 1 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Tax 2 Credits		Receivable account used to accrue Tax 2 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 2 Collected. Depending on the tax laws in your state or province you may not need to use this account.
Tax 2 Billed/Collected		Liability account used to accrue Tax 2 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Trust Clearing		Account in which trust checks are recorded if you enter trust transfers to pay A/R and trust checks using the Create Bills program. Write a receipt to deposit the amount to your general bank.
Retainer Income		Income account in which client retainers are recorded.

Cash-based – Modified Cash accounting

This topic lists the general ledger control accounts for systems that use accounting method M – Modified Cash accounting. Review this section so that you can configure your Chart of Accounts correctly.

Control account	Default	Description
Client Funds in Trust		Liability account used to record the total amount of funds for all clients/matters in all trust accounts.
Fees Revenue		Revenue account in which professional services (fees) revenue are recorded.
WIP Disbursements		Asset account in which daily disbursements are recorded.
WIP Disbursements Write-offs		Revenue reversal or expense account used to record write-offs of WIP disbursements.
Billed Disbursements Revenue		Revenue account used to record revenue generated when billing client disbursements.
Retained Earnings		Account to which revenue and expense accounts are closed out at year-end.
Accounts Payable		Expense account used to record payables.
Tax 1 Credits		Receivable account used to accrue Tax 1 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 1 Collected. Depending on the tax laws in your state or province you may not need to use this account.
Tax 1 Billed/Collected		Liability account used to accrue Tax 1 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Tax 2 Credits		Receivable account used to accrue Tax 2 paid out by the firm for goods and services. This account may be set up as a liability account, reducing the amount of Tax 2 Collected. Depending on the tax laws in your state or province you may not need to use this account.
Tax 2 Billed/Collected		Liability account used to accrue Tax 2 collected from billing. Depending on the tax laws in your state or province, you may not need to use this account.
Trust Clearing		Account in which trust checks are recorded if you enter trust transfers to pay A/R and trust checks using the Create Bills program. Write a receipt to deposit the amount to your general bank.
Retainer Income		Income account in which client retainers are recorded.