[GNC] Lawyers, Retainers, Bills, Oh My!

[Ed Greenberg]

Thanks to Adam and David for good advice. I think I have enough to proceed.
Just to close this out I will point out that it is personal books, not
business books, taxes don't enter into it, but I'm definitely into accrual
accounting. Always have been.

I'm going to carry the retainer as an asset, as suggested, charge the bills
against the appropriate expense account, and eventually sorted out with an
adjusting entry when he returns any overpayment.

Thanks to both of you.

I'm usingly, I have two first cousins who are brothers, whose names are
Adam and David. I was very confused when I saw these names appear together
in my email :-)

On Fri, Jun 26, 2026, 18:25 David Cousens <davidcousens49 at gmail.com> wrote:

> Ed How you  would treat this will depend very much on the exact
> situation, whether you are incurring the expense as a private
> individual or as a business and the relevant taxation rules in your
> jurisdiction which might dictate whether you treat this as an accrual
> or cash expense and which dictate when your lawyer is deemed to have
> earned the retainer and when you are deemed to have incurred the
> expense particularly where the period the retainer covers is split
> between two (or more financial years.  Does your lawyer provide you
> with a detailed bill/statement of when the retainer is reduced by his
> fees for specific actions for example.
>
> In that case you could consider the retainer as an asset held in trust
> by the lawyer and expense the amount against that asset at the times
> and by the amounts specified by the statement (e.eg credit the asset
> account and debit the expense account) rather than expensing them
> directly when you pay the retainer which would allow you to track in
> detail the charges by the lawyer.
>
> When you pay the retainer you would credit your bank account and debit
> the asset account representing the funds held in trust by the lawyer.
> Presumably any unbilled funds will be returned to you when the legal
> action is complete.
>
> Not sure how this would interact with the Accounts Payable in the
> business features though as I haven 't explored what limitations might
> be imposed by the account selection rules in GnuCash the invoice
> processing.
>
> You really need accounting advice relevant to your specific
> jurisdiction and circumstances. The above is a general possibility but
> would need to be modified depending on your jurisdictional rules and
> circumstances. With taht you can them look at implementing the
> necessary process within GnuCash.
>
> David
>
>
> On Fri, 2026-06-26 at 17:25 -0400, Ed Greenberg wrote:
> > I've engaged an attorney on a particular matter.  I sent him $2500 as
> > a
> > retainer.
> >
> > I booked the check against Expenses:Legal Fees (2026-04-20)
> >
> > Now he's earned out most of his retainer (2123.54) and has sent me a
> > bill to top up his retainer. (2026-06-09)
> >
> > I went to Business | Vendors and opened a bill for the the 2123.24
> > against Expenses:Legal Fees. I'll pay it next week and record the
> > check
> > via the Pay Bill process.
> >
> > So perhaps I booked the the original retainer wrong.
> >
> > I'd like to see a report showing the retainer, the bill, and the
> > remaining balance, so that, when we're done, and he sends me a
> > refund,
> > I'll be able to close it out.
> >
> > I don't think a credit note will help me here.  I currently have
> > edited
> > the payment to book a credit balance against a newly created
> > liability
> > account in the name of the attorney, but now that account is totally
> > divorced (pardon the pun) from the accounts payable activity.
> >
> > How would others set this up?
> >
> > Thanks,
> >
> > Ed Greenberg
> >
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> --
> David Cousens
>