If you’re new to legal bookkeeping (or new to Law App), the words office cost and disbursement get used interchangeably in conversation — but they’re not the same thing, and treating them as if they were will quietly distort your accounts. This article explains the difference in plain English, gives examples from a typical law firm, and shows how Law App keeps the two apart.
Once you’re comfortable with the distinction, move on to How to Add a Cost Type — that’s where the difference is actually configured in Law App.
The short version
| Disbursement | Office Cost | |
|---|---|---|
| Who paid? | The firm — out of pocket, on behalf of a client | The firm — for general office running |
| Already in your books? | Yes — recorded against a GL account when you paid the supplier | No — created at the time of billing |
| Recoverable? | Yes — passed straight through to the client | Yes — recovered as a charge on the bill |
| GST treatment | Usually claimed by the firm, on-charged to client | Treated as part of the firm’s services |
| Examples | Court filing fees, search fees, prepaid Express Post bags, agent fees, barrister fees | Photocopies, scans, internal printing, file storage charges |
The everyday rule of thumb: if the firm has already paid an external supplier for it, it’s a disbursement. If it’s a charge the firm generates internally to recover an office overhead, it’s an office cost.
What is a disbursement?
A disbursement is an expense your firm has paid on behalf of a client and now wants to recover.
The key word is paid. The money has already left your business bank account, the supplier’s invoice has been entered, and the cost has hit a General Ledger (GL) account in your books — most often the supplier’s expense account (Postage, Searches, Court Fees, etc.) or a prepaid asset account if you’ve stocked up in advance.
A real example
Your firm buys 10 medium Express Post prepaid bags at the start of the month. The bookkeeper enters the Australia Post invoice and codes the full amount to the Postage & Delivery GL account. The bags now sit in the office, and over the next few weeks they get used on different client files.
When you use one bag to post Mrs Smith’s contract:
- You haven’t paid anything new today — Australia Post was paid weeks ago.
- The cost is already sitting in the Postage & Delivery GL.
- You want to recover the cost of that one bag from Mrs Smith.
That recovery is a disbursement. In Law App, you record it by entering a disbursement journal that says: “Take one bag’s worth of cost from the Postage & Delivery GL and assign it to Mrs Smith’s file.” When you bill Mrs Smith, the cost appears as a disbursement on her invoice.
Other typical disbursements
- Court filing fees you’ve paid through InfoTrack
- Title searches, company searches, PPSR searches
- Barrister or agent fees the firm has paid in advance
- Couriers
- Statutory fees (LRS, ASIC, AFSA)
What is an office cost?
An office cost is a charge the firm creates internally to recover the cost of running the office.
You haven’t paid an external supplier for this specific transaction. The firm absorbs the overhead (the photocopier lease, the paper, the toner) and recovers a per-unit charge from clients at the time of billing.
A real example
Your firm photocopies 50 pages of documents for Mr Jones. Nobody wrote a cheque to anyone today — the photocopier was already there, the paper was already bought. But the firm has a standing per-page charge of $0.30 to recover the cost of providing copies.
When you record 50 photocopies on Mr Jones’s file:
- No supplier has been paid for these specific copies.
- There’s no original entry in the Postage or any other GL to draw from.
- The charge is generated fresh at the time of billing.
That’s an office cost. It’s recovered on the bill, but it doesn’t pull from a previously-recorded expense.
Other typical office costs
- Photocopies and scans (per page)
- Internal printing
- File storage / archiving charges
- Telephone / fax recoveries (where applied)
How Law App keeps the two apart
Both office costs and disbursements live under the same roof in Law App. They share the same Cost Type table and the same journal entry screen. What separates them is one field on the Cost Type: the General Ledger Account.
| Cost Type setup | What Law App treats it as |
|---|---|
| GL Account left blank | Office Cost — system inserts the default office cost GL at billing |
| GL Account populated | Disbursement — system uses that GL when posting the journal |
That’s it. The same screens, the same buttons, the same workflow — the GL Account field on the Cost Type is the switch. For the full setup walkthrough, see How to Add a Cost Type.
Quick decision guide
When you’re about to record an expense and you’re not sure which one it is, ask yourself:
- Has the firm already paid an external supplier for this?
Yes → Disbursement — No → Office Cost - Is the cost already sitting in a GL account in our books?
Yes → Disbursement (you’re moving it from the GL onto a client file) — No → Office Cost (you’re creating the charge at the time of billing) - What kind of expense is it?
External — court fees, searches, postage, agent fees → Disbursement — Internal — photocopies, scans, internal printing → Office Cost
Where to next
Now that you can tell the two apart, the rest of the process is straightforward:
- Setting up a cost type — How to Add a Cost Type
- Recording the transaction (central entry) — How to Enter an Office Cost or Disbursement Journal
- Recording the transaction (from within a file) — How to Enter a Cost from Within a File
Leave a Reply