Preview Questions Law Firm Accountant | Role Specific Skill

Question 1: How do "write-offs" and "bad debt" affect the financial statements of a law firm, and how should they be accounted for?

Which action should you take?

Choose only one option

Write-offs increase the firm's net worth and should be recorded as assets

Write-offs and bad debt reduce revenue and should be documented as expenses or adjustments to accounts receivable

Write-offs are considered as income and should not affect the financial statements

Write-offs only apply to non-billable cases and do not affect financial statements

Question 2: What is the best practice for "quarterly estimated tax payments" for a law firm?

Which action should you take?

Choose only one option

By calculating and paying quarterly estimated taxes based on projected income and expenses

By only paying taxes when income exceeds a specific threshold

By paying taxes annually and ignoring quarterly payments

By avoiding estimated tax payments if the firm operates at a loss

Question 3: What is the correct treatment for "advances from clients" in accounting for a law firm?

Which action should you take?

Choose only one option

Advances should not be recorded until the case is closed

Advances should be treated as income immediately upon receipt

Advances are recorded as assets until the client requests a refund

Advances should be recorded as liabilities until the firm has earned the funds through services rendered

Question 4: How does "utilization rate" impact law firm budgeting, and what strategies can be used to optimize this metric for more accurate financial projections?

Which action should you take?

Choose only one option

Utilization rate is a fixed metric that does not change throughout the year

Utilization rate is irrelevant in law firm budgeting as it only applies to employees

Utilization rate measures the proportion of billable hours compared to total hours worked, and improving it can enhance profitability

Utilization rate is used to track client payments, not internal resources

Question 5: How should "non-billable hours" be accounted for in law firm budgeting?

Which action should you take?

Choose only one option

Non-billable hours should be considered a part of client work, not operational costs

Non-billable hours should be recorded as revenue-generating hours for tax purposes

Non-billable hours should be factored into operational costs, as they contribute to employee salaries and overhead expenses

Non-billable hours should be excluded from the budget, as they do not generate income

Question 6: How should a law firm account for "overhead expenses," and what role do they play in determining profitability?

Which action should you take?

Choose only one option

Overhead expenses are recorded as liabilities until payment is made

Overhead expenses are recorded only as fixed costs and do not affect case profitability

Overhead expenses do not affect profitability in the same way that direct costs do

Overhead expenses should be allocated across different departments and factored into the firm's overall profitability by apportioning them to each case