Preview Questions Law Firm Accountant | Role Specific Skill

Question 1: How do "client-based billing models" impact budgeting for law firms?

Which action should you take?

Choose only one option

Client-based billing models, such as hourly or flat-rate billing, affect revenue projections and operational costs, influencing budget decisions

Client-based billing models only affect revenue, not costs, so they do not impact budgeting

Client-based billing models are irrelevant in budgeting, as all costs are fixed

Client-based billing models are used only for large cases, not day-to-day operations

Question 2: How should "non-exempt employees" be treated in payroll processing in law firms?

Which action should you take?

Choose only one option

Non-exempt employees must receive a higher salary than exempt employees

Non-exempt employees only receive overtime if they work weekends or holidays

Non-exempt employees are not entitled to overtime pay and should receive a fixed salary

Non-exempt employees must be paid overtime wages for hours worked beyond 40 hours per week under the Fair Labor Standards Act (FLSA)

Question 3: In the context of a law firm, what is the importance of "depreciation" in tax preparation?

Which action should you take?

Choose only one option

Depreciation allows the law firm to deduct the cost of assets over time, which can reduce taxable income

Depreciation applies only to expenses related to client trust accounts

Depreciation is only applicable to large, tangible assets like real estate

Depreciation increases the firm's taxable income by reducing expenses

Question 4: How does "client retention" influence budgeting and forecasting in law firms, particularly in relation to recurring revenue streams?

Which action should you take?

Choose only one option

Client retention improves forecast accuracy by providing predictable, recurring revenue streams that can be factored into long-term budgets

Client retention only affects billing rates, not revenue projections

Client retention applies solely to contingency-based clients and does not affect general budgeting

Client retention is irrelevant to forecasting, as every case is considered a one-time engagement

Question 5: What are the key differences between "cash basis" and "accrual basis" accounting in a law firm, and how do they impact the firm's financial statements?

Which action should you take?

Choose only one option

Cash basis records income and expenses when they are actually received or paid, while accrual basis records transactions when they are incurred

Cash basis is preferred for tax purposes, while accrual basis is not allowed in law firms

Cash basis accounting affects cash flow, while accrual basis affects profitability

Cash basis accounts for income when services are billed, while accrual basis records revenue when the client receives the bill

Question 6: How should "unpredictable legal costs" (e.g., unexpected litigation expenses) be planned for in a law firm's budget?

Which action should you take?

Choose only one option

Unpredictable legal costs should be planned as revenue-generating activities

Unpredictable legal costs should be ignored in the budgeting process since they cannot be anticipated

Unpredictable legal costs should be deferred to the next year's budget

Unpredictable legal costs should be included in the contingency section of the budget to ensure the firm has adequate resources for unexpected expenses