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True or False: A law practice typically has only one Book of Original Entry.
True or False: The General Ledger is used to post all financial transactions in a law practice (general and trust) and to create a trial balance.
True or False: Trust funds can be commingled with general funds but must be separated within seven days of the initial mingled deposit.
True or False: One of the fundamentals of a double-entry bookkeeping system is that for every credit there must be an equal and opposite debit—this result can be accomplished by decreasing one debit account and offsetting it with an increase in another debit account.
Jana opened her sole practice three months ago and thought she’d only have one or two clients so didn’t bother to get any computerized accounting software. Instead, she bought one basic ledger book in which she records all her transactions. Once a week she tallies the credits and debits in her ledger and makes sure she has enough money to pay her office expenses. Jana also thought when she first opened that she would work on a “bill-rendered-once-work-is-complete” basis, so she only has a single general account at the bank.
Two things have happened since Jana first opened her practice. First, she’s been much busier than she expected, and her ledger book is now beginning to look messy and inadequate. There are a lot of stubs and receipts stapled to the inside of the ledger as Jana is not sure how to record some of the items she has encountered. Second, she has taken on a few unreliable clients from whom she has begun to ask for cash retainers. Because she only has the one bank account, the retainer money has been deposited into her general account.
Several things must be improved in Jana’s office with respect to accounting matters. Choose the answer that makes the best suggestions for improvement.
Choose one answer.