How to Record Co-Counsel Fee Sharing (Shared Project Work)
Recording the division of fees when two separate firms work together on a single matter and one firm handles the billing.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable - Client (Gross Bill) | Asset (+) | 10,000.00 | - |
| Legal Service Revenue (Firm's Share) | Revenue (+) | - | 6,000.00 |
| Accounts Payable - Co-Counsel (Outside Share) | Liability (+) | - | 4,000.00 |
💡 Accountant's Note
In Co-Counsel arrangements, the 'Lead' firm often bills the client for the total work. Under ASC 606, if the lead firm is acting as the 'Principal' for the services, they record the gross bill as AR, but only their portion as revenue, with the remainder recorded as a liability to the co-counsel. Alternatively, some firms record 'Gross Revenue' and 'Cost of Sales - Co-Counsel Fees' depending on who holds the primary performance obligation.
Practitioner & Systems Framework
💻 ERP Architecture
Requires a specific 'Consultant' or 'Outside Counsel' expense category in the billing module. The payment to the co-counsel should only be made *after* the client pays the lead firm.
⚠️ Audit Flags
Gross vs. Net reporting. Misclassifying co-counsel fees can inflate a firm's top-line revenue without increasing profit.
📄 Required Documentation
Co-Counsel Agreement and the detailed bill showing hours for both firms.
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Expert Analysis by Qusai Ahmad
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Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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