Preview Questions Law Firm Accountant | Role Specific Skill

Question 1: How do you account for "disbursements" in law firm bookkeeping?

Which action should you take?

Choose only one option

Disbursements are not recorded in the firm's books unless they exceed a certain threshold

Disbursements should be recorded separately as expenses, with a distinction made between client-paid disbursements and firm-paid expenses

Disbursements should be recorded as revenue, as they are often reimbursed by clients

Disbursements should be excluded from financial statements unless they are part of settlement payments

Question 2: What is the significance of "wage garnishments" in law firm payroll, and how should they be handled according to legal requirements?

Which action should you take?

Choose only one option

Wage garnishments are optional unless the employee agrees to them

Wage garnishments are only relevant for employees with certain types of debt

Wage garnishments must be deducted from an employee's paycheck according to the court order, with proper reporting and compliance

Wage garnishments apply only to employees in financial hardship

Question 3: How does "cash flow forecasting" help law firms in managing their finances, and what challenges arise in creating accurate cash flow forecasts?

Which action should you take?

Choose only one option

Cash flow forecasting helps ensure the firm has enough liquidity to meet obligations and plan for future investments

Cash flow forecasting is unnecessary for firms that only handle contingency cases

Cash flow forecasting focuses only on tracking client payments, not expenses

Cash flow forecasting only applies to firms with fixed monthly retainers

Question 4: How does a law firm accountant ensure "accurate recording of expenses"?

Which action should you take?

Choose only one option

By verifying receipts, categorizing expenses, and recording them according to firm policies

By recording all expenses in one category to simplify bookkeeping

By only recording expenses at the end of the year

By estimating expenses based on previous years' spending

Question 5: How does a Law Firm Accountant handle "interest income" from client trust accounts?

Which action should you take?

Choose only one option

Interest income should be excluded from financial reports

Interest income should be treated as part of regular business income

Interest income should be reported separately from other income and allocated appropriately to client accounts

Interest income should be allocated to the firm's general operating account

Question 6: How should "bonus payments" be treated for payroll tax purposes in a law firm?

Which action should you take?

Choose only one option

Bonus payments are not subject to payroll taxes as they are considered a gift

Bonus payments should be subject to regular income tax withholding and FICA taxes, just like regular wages

Bonus payments should be deducted as expenses, with no tax consequences

Bonus payments are not subject to tax withholding if paid in the same month as regular wages