Accounting and Compliance for Law Firms and Professional Practices
Practice accounting, client money reconciliation and tax compliance for firms running practice-management software.
First, a Point of Clarification
PCLaw and Time Matters are practice-management and billing products published by LexisNexis, used mainly by law firms in North America. MPVD & Associates has no connection with those products – we do not sell, licence, implement or support them, and this page is not a source of help with the software itself. For that, LexisNexis is the right place to go.
What we do provide, and the reason this page exists, is the accounting and compliance work that sits behind any professional practice – whichever system it happens to run on. Law firms, chartered accountancy practices, consultancies and other professional partnerships all face the same underlying requirements: books that reconcile, client money kept properly separate, partner accounts that are accurate, and statutory filings made on time.
If that is what you are looking for, the rest of this page sets out how we help.
Accounting Requirements Specific to Professional Practices
Professional firms have accounting characteristics that general business bookkeeping does not address well.
- Client money – funds held on behalf of clients must be kept separate from the firm’s own money and reconciled regularly. Mixing the two is a serious matter in any professional context.
- Work in progress – time recorded but not yet billed represents real value and needs consistent recognition, particularly where matters run across year ends.
- Disbursements – amounts paid out on a client’s behalf need to be distinguished from the firm’s own expenses, with different treatment for both accounting and GST.
- Partner accounts – capital, current and drawings accounts maintained per partner, with profit shares, interest and remuneration allocated as the partnership or LLP agreement provides.
- GST on professional services – place of supply for services delivered to clients in other states or abroad, and the treatment of reimbursements and disbursements.
- TDS in both directions – deducted from your fees by corporate clients, and deducted by you on rent, salaries and payments to counsel or contractors.
Practice-management software handles time recording and billing well. It does not, on its own, produce statutory financial statements, compute a partnership tax position or file returns – which is where we come in.
How We Support Professional Firms
Practice Accounting
Books maintained with fee income, disbursements and work in progress treated consistently, and monthly accounts the partners can actually use.
Client Account Reconciliation
Client funds reconciled against ledgers on a regular cycle, with differences investigated promptly rather than carried forward.
Partner Account Maintenance
Capital, current and drawings accounts kept per partner, with profit share, interest and remuneration allocated as your agreement provides.
GST for Professional Services
Place of supply determined correctly for out-of-state and overseas clients, and reimbursements and disbursements treated properly.
TDS Compliance
Credits for tax deducted from your fees reconciled and claimed, and your own deduction obligations on rent, salaries and contractors handled.
Tax Returns and Audit
Firm and partner returns prepared, with statutory or tax audit conducted where the applicable thresholds are crossed.
How We Work With Professional Practices
Step 1 – Understanding How the Practice Runs
How fees are billed, whether client money is held, how disbursements are handled, and what the partnership or LLP agreement says about profit sharing and drawings.
Step 2 – Reviewing the Existing Records
We look at how the current system is being used, where data has to be re-keyed, and whether client account reconciliations are actually being performed and documented.
Step 3 – Establishing the Accounting Cycle
A monthly close covering fee income, disbursements, work in progress and partner accounts, with data exported from your existing practice system rather than duplicated.
Step 4 – Statutory Compliance
GST returns, TDS statements and the annual filings applicable to your structure, handled against a calendar rather than at the deadline.
Step 5 – Year End and Partner Reporting
Financial statements prepared, audit conducted where required, partner allocations finalised, and the firm and partner tax returns filed.
Structuring a Professional Practice in India
Professional practices in India commonly operate as partnership firms or limited liability partnerships. An LLP gives partners limited liability and a separate legal identity while retaining partnership flexibility, which is why many practices adopt it. Note that some professions are subject to their own regulatory rules on permitted structures, so the professional body’s requirements need checking alongside the general company and LLP law.
If you are considering the structure of a new or existing practice, see our pages on LLP formation in India and the limited liability partnership structure generally.
Why Professional Firms Work With Us
We are a professional practice ourselves, which means the particular accounting characteristics of one are familiar rather than novel.
- Practice accounting understood. Work in progress, disbursements and partner accounts are handled as a matter of routine.
- Client money taken seriously. Reconciliations performed on a defined cycle and properly documented.
- Software-agnostic. We work from data exported from whatever practice system you use rather than requiring you to change it.
- Full compliance coverage. Accounting, GST, TDS, audit and the firm and partner returns in one place.
- Discretion. Professional practices handle confidential client information, and our engagement arrangements reflect that.
Frequently Asked Questions
Our experienced company audit and taxation professionals help you navigate complex tax laws and regulatory requirements. Contact us today to schedule a consultation.
Get Your Practice Accounts and Compliance Handled
Tell us how your practice is structured and what system you use for time and billing. We will set out how we would run the accounting and compliance around it, and quote a fixed fee.
