Sharing customers between GnuCash files

[John Ralls]

> On Jan 21, 2016, at 9:28 AM, Macho Philipovich <macho at resist.ca> wrote:
> 
>   Thanks for the response Derek.
> 
>   On 2016-01-21 10:57 AM, Derek Atkins wrote:
> 
> This doesn't sound like a trust account; it sounds like an ESCROW
> account.  I suspect it's not its own taxable entity, but is, rather,
> taxed as part of the business.  The advice given before is probably
> wrong.  I think the escrow account SHOULD be part of your business file
> and NOT tracked separately.
> 
> But honestly, I'm not sure why you need this extra account?  Is there
> some canadian legal requirement to hold the funds in a separate account?
> Or are you just trying to figure out how to handle pre-payment by your
> customers?
> 
>   My understanding of escrow accounts is that they're administered by an
>   entity who is a third-party to the transactions taking place.
>   In many (most?) jurisdictions, lawyers are legally required to keep a
>   separate account for money received from their clients for which they
>   have not yet invoiced the client. For example, the Minnesota State Bar
>   Association has published one guide for keeping such client trust
>   accounts using GnuCash, and tells lawyers to "Keep your trust accounts
>   separate from your business accounts if using a general-purpose
>   accounting program […] In GnuCash, use a separate file.":
>   [1]http://www.mnbar.org/docs/default-source/practicelaw-public/keeping-
>   client-trust-accounts-with-gnucash-2-2-4.pdf
>   Other contributors to this list seem to be keeping the information in
>   the same file:
>   [2]https://lists.gnucash.org/pipermail/gnucash-user/2011-March/039321.h
>   tml
>   Whether this passes muster with the local bar association probably
>   depends upon their specific bookkeeping rules. My vague sense is that
>   here in Quebec, so long as you can generate separate reports for the
>   accounts to submit to the bar association, this should be fine (this is
>   not to be construed as legal advice to anyone else).
>   You are correct that this is not its own taxable entity: the money in
>   that account does not even belong to me.
>   Essentially, it does seem to me as though combining them in the same
>   file makes the most sense to me, but other participants in this list
>   (and the Minnesota Bar) seem to strongly disagree. If I take that
>   approach, I run into the problem of having to duplicate a system of
>   customers, files, and invoices, which seems silly.
>   Any insights would be appreciated.

You don't need to copy over the customers and invoices. Dunno what you mean by files.

Follow the process from the MNBA: You just create a simple book with the bank account(s) that actually hold the money and a corresponding Liability account for each. You create sub accounts in one or the other, one for each client "matter"; I guess that means that if you're doing both a will and a suit for client X you have a sub-account for each. When you get a check from the client you deposit it in the trust account and record the deposit in the trust account book. When you invoice a client and transfer money from the trust account you record that as a withdrawal from the trust account book and in your firm's book you treat it as a payment just as if the client had written you a check directly for the invoice. All of the "business" stuff lives in the firm's book. The trust book has only simple deposit and withdrawal transactions. I'd recommend using the client's name and check number as the description on deposits and the client's name and your invoice number for the description on withdrawals (if you use one transfer for multiple invoices use the split memo field instead) to make a nice audit trail, but you might have a different way of working or specific guidance from your bar association about that.

Regards,
John Ralls