072 Legal and Auditing Expense
Expenses
Semi-Fixed
Synopsis
The cost of lawyer’s fees and accounting and auditing expenses are recorded in Account 072, Legal and Auditing Expense. This includes retainers and professional fees.
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Debits |
Credits |
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Example 1
Record the $5,000 monthly accrual for the annual audit fee.
Journal: Standard Entries Journal
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Entry: |
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Debit |
Credit |
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Account 072-09 |
Legal & Audit Expense – General & Administrative |
$5,000 |
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Account 331 |
Other Payables |
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$5,000 |
Example 2
Record the invoice of $664 for legal fees incurred due to a mechanical customer’s dispute.
Journal: Cash Disbursements and Purchase
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Entry: |
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Debit |
Credit |
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Account 072-05 |
Legal & Audit Expense – Mechanical Department |
$664 |
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Account 300 |
Accounts Payable – Trade Creditors |
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$664 |
Distribution of Expenses
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Departmental Distribution |
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072 Legal & Auditing Expense |
New Veh. |
Used Veh. |
Lease & Rental |
Mechanical |
Body Shop |
Parts & Access. |
Gen & Admin. |
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01 |
02 |
03 |
05 |
06 |
07 |
09 |
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Attorney retainer fees |
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Total expense |
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Public accountant’s fees |
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Total expense |
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Attorney’s fees for new vehicle department legal work |
Total expense |
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Attorney’s fees for general legal work of the dealership |
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Total expense |
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Fees for filing in small claims courts |
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Total expense |
Comments
Legal and Auditing Expenses should be charged to the Department benefiting from the service. If more than one Department benefits, then the expense should be pro-rated to the Departments in question. Please refer to the Expense Distribution table above.