Clio Accounting: Basics and Guidelines to Get Started

The account history shows a list of accounting records that were recorded in a ledger account within the chart of accounts. This list of records is also known as a bank register. You can compare your bank feed records with the account history to reconcile the account.

Accounts payable is money owed by a law firm to its suppliers and is shown as a liability on a law firm's balance sheet. 

Accounts receivable refers to money owed to a law firm after legal services are supplied or delivered. In Clio Accounting, invoices generated and approved in Clio Manage that have an outstanding balance will automatically port over and sync to the Accounts receivable tab in Clio Accounting. This section in Clio Accounting will show a summary of outstanding invoices with a remaining balance and a breakdown by client. You can view each client's outstanding invoices and whether they have a trust balance. 

Assets, including current and long-term assets, are resources that a law firm owns that are expected to generate cash or economic value (e.g. cash, savings account, petty cash balance, accounts receivable, undeposited funds, prepaid insurance, vehicles, buildings, etc.). Assets are reported on a law firm's balance sheet and are one component of a law firm's chart of accounts.

Current assets are items such as cash, inventories, and accounts receivable. Non-current assets are long-term assets that have a useful life of more than one year and usually last for several years. Long-term assets are considered to be less liquid, meaning they cannot be easily liquidated into cash.. 

A balance sheet is a standard financial statement that reports on a law firm's assets, liabilities, and equity. It provides an overview of what a law firm owns and owes. A balance sheet is one standard financial statement for a law firm, with the others being the profit and loss and cash flow statements.

Bookkeeping is the act of recording and organizing financial data, and is a component of accounting. While bookkeeping refers to tracking and recording a law firm's financial transactions and processing payroll, accounting is interpreting bookkeeping data to analyze financial statements and file tax returns.

A cash flow statement is a standard financial statement that summarizes the movement of cash in and cash out for a law firm. It measures how well a law firm generates cash to pay owed debt and expenses. A cash flow statement is one standard financial statement for a law firm, with the others being the profit and loss statement and balance sheet.

The chart of accounts is a list of all financial records and bank accounts that organize a law firm's general ledger, including assets, liabilities, equity, income, and expenses. Your chart of accounts makes it easy to quickly find and access transactions, and is the starting point for your firm's accounting needs. Think of your chart of accounts as a filing cabinet. Within that cabinet, you will have multiple folders, or ledgers, and within each folder there will be papers, or entries, specific to your law firm. 

In double-entry accounting, debits refer to incoming money, and credits refer to outgoing money. For every debit in one account, another account should have a corresponding credit of equal value. When this happens, your books are balanced.

In double-entry accounting, debits refer to incoming money, and credits refer to outgoing money. For every debit in one account, another account should have a corresponding credit of equal value. When this happens, your books are balanced.

In Clio Accounting, you can create a deposit to match bank transactions during the bank feed matching process. For example, if your firm received multiple checks and entered them as payments in Clio Manage, and later deposited the checks, you would see a lump sum deposit in your bank feed. You can then create a deposit to match the bank transaction. In the check example, you would want to select checks as the payment included in the deposit.

Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to a different account. The double-entry system has two equal and corresponding sides known as debit and credit. 

Equity refers to assets minus liabilities, or the amount of money that would be left if a law firm sold its assets and paid off its debts and liabilities (e.g. common stock, retained earnings, owner distribution, opening balance equity, etc.). Equity is reported on a law firm's balance sheet and is one component of a law firm's chart of accounts.

Equity also includes owner's equity (the stake in a private business that belongs to the owner) and shareholder's equity (the stake in a publicly traded company that belongs to shareholders who hold stock). 

An expense refers to the cost of operating a law firm in order to generate revenue (e.g. payroll expenses, staff wages, marketing software, website, insurance, IT services, repairs and maintenance, cellphones, utilities, travel, parking, payment to vendors, etc). A law firm can write off tax-deductible expenses on an income tax return. Expenses are one component of a law firm's chart of accounts. 

A general ledger is an account used to record your law firm's financial transactions, including credits (money in) and debits (money out). Each general ledger account stores and summarizes a specific type of transaction (i.e. assets, liabilities, expenses, income, and equity). You can find a list of your general ledger accounts in your chart of accounts.

A journal entry is a record of a single business transaction that notes which accounts are affected. In double-entry bookkeeping, every transaction will have one journal entry with a credit and a debit side. Clio Accounting creates journal entries from the data synced from Clio Manage and your bank feed. You can also manually create journal entries to make adjustments, such as correcting an error.

Journal entries should not be commonly used. If your books do not balance, determine why they do not balance before creating a journal entry. Common reasons for books not balancing include a check that a firm user forgot to deposit, a payment that was not recorded, etc. 

Income refers to the income or revenue generated by your law firm. Income can be generated from the sale of legal services, through investment income, gain from selling equipment, etc. Income is reported on a law firm's income sheet and is a component of a law firm's chart of accounts.

A liability refers to a law firm's debt or financial obligation that is owed to another individual, business, or organization (e.g. accounts payable, debt to vendors, bank loans, credit card debts, mortgage for an office space, etc.). Liabilities are reported on a law firm's balance sheet (usually in opposition to assets) and are one component of a law firm's chart of accounts. 

Operating expenses are regular expenses that a law firm pays to vendors to run their business (e.g. payroll expenses, marketing expenses, IT, travel, employee related, etc.). In Clio Accounting, expenses paid by credit card are downloaded from your bank using the automatic bank feed, where you can then categorize and add them as transactions. If your firm paid expenses by check, cash or another non-credit card methods, you can manually add expenses in the Operating expenses tab. 

The profit and loss (P&L) statement refers to a law firm's revenue minus expenses during a given time period, or the revenue, expenses, gains, and losses reported by a law firm. The P&L statement is also known as the income statement. The P&L statement is one standard financial statement for a law firm, with the others being the balance sheet and cash flow statement.

Reconciliation is a process that compares multiple sets of records to identify any discrepancies between them and check that a law firm's records are correct. When there are no unexplained differences, the record is said to be reconciled. Reconciliation is a key part of preventing fraud and maintaining regulatory compliance if your firm uses trust accounts. It should be performed on a regular basis depending on your jurisdiction.

In Clio Accounting, you can reconcile your operating and trust bank accounts. Operating accounts undergo two-way reconciliation, where you compare bank records to corresponding ledger accounts (client transactions grouped by each client). Trust accounts undergo three-way reconciliation, where you compare the bank's records, client trust ledgers, and trust liabilities.

In Clio Accounting, you can split a transaction into two different categories when doing bank feed matching in order to get a more detailed view of your firm's expenses, instead of entering a transaction as one big expense. For example, you can use a split for payroll purposes if your firm wants to separate payroll for staff, the owner, and contractors. You can also use a split to differentiate money spent at an office supply depot where you spent some on office supplies and the rest on computer equipment.

A trial balance is a type of report that shows the closing balances of all general ledger accounts during a certain period of time. This report is used at the end of a reporting period to ensure that all accounts and balances add up accordingly. 

Similar to the operating deposit, in Clio Accounting, you can create a trust deposit to manage bulk deposits for trust payments (i.e. payments made to trust requests in Clio Manage). A trust deposit can then be matched to a bank transaction. For payments made by Clio Payments, Clio Accounting will automatically create a trust deposit based on the payment and payout data. 

In Clio Manage, when you apply a client's trust funds to pay one or multiple invoices, the payments are recorded and synced to Clio Accounting. In Clio Accounting, you can create a trust withdrawal to include invoice payments made by applying your client's trust funds. This will show fund movement from the trust account to an operating account. The withdrawal will then be matched to bank transactions on both the trust and operating accounts. 

The uncleared balance is the amount of money in a bank account that includes transactions that have been initiated but not yet cleared or reconciled. It represents the difference between the bank statement balance and the adjusted or reconciled balance in your firm's accounting records. Uncleared transactions and uncleared balance highlight the temporary discrepancies between your firm's accounting records and bank statement until the reconciliation process is completed.

Uncleared transactions are entries in a bank statement or financial records that have been initiated but have not yet been verified or reconciled. Common examples include checks that have been issued but not yet cashed, electronic transfers that are pending, or debit/credit card transactions that are in a pending status. Uncleared transactions and uncleared balance highlight the temporary discrepancies between your firm's accounting records and bank statement until the reconciliation process is completed.

A vendor is a person or business (a supplier) that supplies products or services to a law firm (e.g. bank, catering company, office supply depot, airline, transportation service, software service, etc.). In Clio Accounting, you can track your firm's vendors in the Vendors tab. You can automatically create vendor related expenses by categorizing bank feed transactions or by manually adding them using the Add expense button.