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General Ledger - GL Operations - Non-Chargeable Entries

Overview


Generally firms track internal non-chargeable time in four broad categories or general activities:

  • Firm Management and Administration;

  • Practice Development, and;

  • Professional Development, and;

Depending on the partnership structure and subsequent reporting requirements, these categories can be further broken down into additional non-chargeable productive time like "Continuing Legal Education"; considered a further breakdown of "Professional Development".
Firms also track other productive non-chargeable work like:

  • Pro-bono work,

  • Staff matters, and;

  • Specially remunerated work (board of director's work etc.).

In some environments members are asked to also track non-chargeable and non-productive time such as "absenteeism".
These types of classifications typically have a one-to-one relationship with a corresponding non-chargeable matter. The latter can also be used to track related non-chargeable expenses (if any), thus expanding reporting options costs. Users can assess these costs by activity when they report by matter or GL account (a different classification of the same data driven by the disbursement code used).

Non-chargeable expenses are recorded into non-chargeable matters using an expense type and/or disbursement code mapping matrix developed internally, based on the firms' finance reporting objectives.

Users of these processes and reporting opportunities may decide to change the status of unbilled non-chargeable entries in order to have more flexibility when reporting current versus old non-chargeable activity. In this case the non-chargeable entry is "removed"; a function that is displayed with entry write-off (applicable only to chargeable entries). For example, users may opt to "remove" all non-chargeable entries with a transaction date outside of the current and prior fiscal years. Once the entries are removed, they are not considered unbilled, this means that users can further filter results by applying the unbilled and written-off/removed filter options to split a selection based on fiscal years. The impact of the remove function (if any) will be zero on the financial statements.

Anytime that the firm wants to assess the accounting impact of a transaction, the steps to follow are:

  1. Set the "Display GL Operations" feature to ON – found under the "Other" main menu option;

  2. Execute the desired transaction;

  3. Print list View (right hand click option) the system journal entry;

  4. Track back the GL operations to the GL Account and or disbursement code (and related mapping);

  5. Track back the GL operation to your financial statement grouping;

Note: At implementation Dexco makes best practice recommendations with respect to setting the non-chargeable entry model, however the firm ultimately decides the structure and the implementation thereof, including the mapping of where to expense the non-chargeable time and or disbursement and when needed the recovery (or contra in most cases).

Posting Non-Chargeable Disbursement


  1. If the disbursement is not - chargeable and it is entered through disbursement entry then the GL Operation is:

Debit - The GL account assigned to the expense field in the disbursement code properties (generally an expense)
Credit - The GL Account assigned to "Recovery" (generally revenue or contra-
Expense)

  1. If you record the non-chargeable disbursement through AP or QP (quick payment) because you will recognize the amount owed to the supplier at the same time that you charge the non-chargeable matter then the entry is:

Debit - The GL account assigned to the expense field in the disbursement code properties (generally an expense)
Credit - AP (a liability) or Bank

  1. If the amount charged to the matter is less or more than the amount payable to the supplier, the difference will be a debit or credit to the recovery account.

WO/ Remove (unbilled disbursements or non-chargeable disbursements)


  1. The WO of chargeable disbursements generates the following GL Operation:

Debit - Unbilled Disbursements WO
Credit - Unbilled Disbursements (generally an asset)

  1. The removal of non-chargeable disbursements does not generate any GL operations.

Debit The GL Account assigned to "Recovery" (generally revenue or contra-expense)
Credit The GL account assigned to the expense field in the disbursement code properties (generally an expense)

The impact on the Income Statement will depend on how the user maps the affected GL accounts.

  • If the user maps the same GL account to the expense and recovery fields for hard disbursements (processed through quick cheques or AP) – typical for most clients – then the impact to the revenue section and expense section is nil.

  • If the user maps different GL accounts to the expense and recovery fields for hard (processed through quick cheques or AP) and /or soft disbursements – typical for most clients – then the impact to the revenue section and expense section is also nil provided these are grouped within the same lowest level financial statement line – best practice recommendation at go-live.

Posting Non-Chargeable Time


Accounting impact: Non-chargeable time is not WIP and therefore it is journalized into firm defined GL Accounts (expense and recovery) which are established in time code properties. Typically both GL Accounts are netted against each other for zero presentation on the financial statements (thus the equivalent of zero rated). The fee and resulting cash are not allocated amongst timekeepers with non-chargeable time on a matter.

Debit The GL account assigned to the expense field in the time code properties
Credit The GL account assigned to the recovery field in the time code properties

WO / Remove of Non-Chargeable Time


Accounting impact: Non-chargeable time was never WIP; therefore it is not bad debt expense. On removal (write-off) there are no additional GL operations.

RELATED DOCUMENTS:

Non-Chargeable Activity Structure - Concept Guide