Year-End Bookkeeping Checklist for Law Firms: Trust Accounting and Compliance

By: Keith Hill Jr.

As 2025 winds down and the holiday spirit builds, it’s easy to get swept up in celebrations and a much-needed break. Between vacations, client deadlines, and office closures, bookkeeping can easily fall behind at year's end. But once the last glass of eggnog is finished at the holiday party, the year-end rush arrives quickly, and it can hit harder than whatever the eggnog was spiked with!

Whether you’re a bookkeeper of a firm or perhaps you manage one, here are 7 key points, in no particular order, to keep in mind as we head into the final stretch of the year, so you can enjoy the holidays without a backlog of LSO and CRA tasks waiting for you in January.

1. Reconcile All Accounts: Trust, General, and Credit Cards

Task: This should go without saying, but your main priority is to reconcile every trust and general account through the end of the year. This also includes reconciling your business credit-card statement with all current-year activity (typically this will include the January 2026 statement, as it often contains prior-year charges).

Purpose: Clean reconciliations support compliance and accurate reporting. Any variance, errors, or uncleared items that should not remain outstanding should be addressed before year-end to avoid CRA and LSO issues.

2. Review Trust Listing

Task: Identify negative trust balances and correct them immediately. Review trust balances for accuracy (don’t disregard balances just because they may be small/negligible). And review trust funds with no activity in the past 11 months (so they don’t hit the 12-month mark in December).

Purpose: Prevent trust violations and ensure inactive and unclaimed trust balances are addressed before they trigger reporting obligations with the LSO.

3. Review Expenses

Task: Review expense accounts to confirm proper categorization. Take this time to correct duplicates and mis-postings.

Purpose: Accurate expenses support clear reporting and reduce accountant adjustments later.

4. Tax Readiness (HST/GST)

Task: Run your HST/GST report and make sure all input tax credits are captured. Write off any uncollectible fees or disbursements so you do not overstate HST owing.

Purpose: Protects firm cash flow and ensures accurate tax reporting.

5. Review Receivables for Write-Offs

Task: Run your Aged AR report. Follow up on outstanding invoices, finalize billing where possible, and determine which receivables should be written off — provisionally or permanently.

Purpose: Clears outdated balances and improves financial accuracy going into the new year. Also assist with ensuring that HST is not unnecessarily overpaid.

6. Back Up, Organize, and Secure Data

Task: Many years ago, when most of my work happened in physical offices, I would close out the firm’s year by filling a banker’s box with all reports and source documents, labelling it “Bookkeeping Records – Year 20XX”, and storing it usually on the shelf. While our systems have evolved, the principle remains the same: preserve complete, organized records at year-end so they are accessible and so you're ready for the year ahead with a clean slate. Whether that “box” is on a shelf or stored in the cloud or locally on a drive, the purpose is still the same.

Purpose: Ensures audit readiness and provides clean documentation for the new year.

7. Prepare for New LSO Requirement

Task: This is a new item to put on your year-end task to-do list. Effective immediately and every year going forward, you must complete a Client Contingency Plan. Familiarize

yourself with the Law Society of Ontario’s Client Contingency Plan requirement due March 31, 2026.

Purpose: Ensures you are ahead of the curve rather than scrambling as the March deadline approaches.+

Details here: https://rb.gy/u1jq5y

Breathe — Then Execute

Though true year-end completion can only happen once December closes, the work you do now sets the tone for a smooth January and a new year. A little structure and preparation today will position you for success when the calendar turns. Your year-end doesn’t have to be overwhelming. By tidying your records, addressing outstanding items, and ensuring key tasks are underway, you give yourself the gift of peace of mind. With the groundwork in place, you can enjoy the holidays knowing your books are organized, your compliance responsibilities are on track, and you are stepping into the new year with clarity, confidence, and control.

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Keith Hill Jr. is the President of Bookkeeping Matters Inc. (BMI), a leading provider of legal bookkeeping services for over a decade. Serving lawyers across Ontario and beyond, BMI has established a reputation for excellence in legal accounting. Drawing on his experience as a former Legal Accounting professor, Keith has also positioned BMI as a premier source of online legal accounting education. Specializing in various practice management software, BMI is dedicated to helping law firms optimize their financial operations.

Contact BMI at info@bookkeepingmatters.ca, 1-800-893-2820 or visit www.BookkeepingMatters.ca.

©2025 Bookkeeping Matters Inc. All rights reserved. Reproduction with credit is permitted.