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Accounting for legal practices in Canada comes down to keeping two kinds of money apart. Client money sits in a trust account and never counts as your revenue, while fees you’ve earned go through the general account like any other business income. In Ontario the trust side gets a full reconciliation every month, due within 25 days of the bank statement period ending, and other provinces set their own version through their law societies.
Most of the rest is ordinary small business bookkeeping with a few sharp edges. Here’s where those edges are.
What goes in the trust account, and what doesn’t?
Money you hold for a client belongs to the client. A retainer paid before any work is done, funds for a real estate closing, a settlement cheque waiting to be paid out: all of that is trust money. It goes into a trust account, and you don’t touch it until it’s earned or the client says where it goes.
Your own money is different. When a bill has been issued and the fee is earned, it moves from trust to the general account. Leave earned fees sitting in trust and you’ve mixed funds, which is exactly what the rules exist to stop. So does pulling a fee out before you’ve billed it.
The Law Society of Ontario asks for three records to agree each month: the bank balance, the list of what you owe each client, and your own cash book. If the three don’t match, you find out why before the deadline, not after. We couldn’t open the full text of the by-law from our side, so read the current version on the society’s site before you build your process around it.
How do the books differ from a normal business?
You’ll run a client ledger for each matter. It shows every dollar in and out of trust for that client, and its balance can never go below zero. A negative balance means you’ve spent one client’s money on another’s matter.
The general side looks familiar: fees, rent, wages, software, insurance, the lot. Disbursements you pay for a client and get back are the part people trip over. Track them per matter so you can bill them and so your expenses aren’t overstated.
| Item | Where it lives | Counts as your income? |
|---|---|---|
| Retainer received | Trust account | No, not until earned and billed |
| Earned fee moved out | General account | Yes |
| Client funds for a closing | Trust account | No |
| Office rent and wages | General account | These are your expenses |
| Disbursement paid for a client | Trust or general, per matter | Only what you bill on top |
Do legal fees carry sales tax?
The tax point is worth a plain example. Say you bill a $10,000 fee in Ontario. The GST/HST calculator puts HST at 13%, which is $1,300, for a total of $11,300. That $1,300 isn’t yours. You collect it and remit it, so it shouldn’t show up in your profit. Whether a given service is taxable, and how to treat disbursements, is a question for your accountant or the CRA’s GST/HST pages, and we haven’t tested every case.
What does a clerk cost once payroll is added?
Firms often forget that wages cost more than the pay. Take a clerk earning $3,000 every two weeks in Ontario. The payroll remittance calculator shows about $961 to send the CRA each pay period, made up of the amounts held back from the clerk plus your own CPP and EI share. The real cost of that clerk is about $3,228 per pay period, not $3,000.
If you’re a sole practitioner, your own income tax follows different rules, and the self-employed tax calculator gives a rough picture. For a professional corporation, try the corporate tax calculator on your expected profit. It uses a blended 2026 Ontario small business rate that isn’t published as a single number, so treat that result as an estimate.
Which mistakes cause the most trouble?
Three come up over and over. Late reconciliations, because month end gets busy. Fees taken from trust before the bill goes out. And bookkeeping software set up for a shop, with no client ledgers at all. A general accounting package can work for the general side, but check that it can hold client ledgers and produce the trust reports your law society expects.
Records matter too. The CRA says business records should generally be kept for six years from the end of the last tax year they relate to. Law society rules can ask for longer on trust records, so keep whichever period is longer.
And a short one: your bookkeeper can do the work, but you’re the one responsible. That’s true for the CRA, and it’s true for your regulator.
Where the numbers come from
Payroll and corporate figures come from the calculators on this site, which use 2026 federal and Ontario data from the CRA. The 25 day reconciliation deadline and the three way comparison come from the Law Society of Ontario. The six year record period comes from the CRA’s guide on keeping records. We did not confirm the rules of the other provinces or any retention period for trust records, so check your own society.
Frequently asked questions
Is trust money my income?
No. It belongs to the client until it's earned and billed. Only then does it move to your general account and count as revenue.
How often do I reconcile a trust account in Ontario?
Every month, within 25 days after the end of the period on the bank statement, according to the Law Society of Ontario.
Can I use regular accounting software?
For the general side, often yes. Check that it can hold a ledger per client and produce the trust reports your law society asks for.
How long do I keep records?
The CRA says six years from the end of the last tax year the records relate to. Your law society may ask for more on trust records.
Do other provinces follow the Ontario rules?
Each province's law society sets its own rules. We only confirmed the Ontario ones, so read yours before you set up your process.
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Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.