How to Enter Disbursements “Incurred As Agent”


Note: Per CRA P-209R, The phrase “incurred as agent” indicates that the disbursement described is generally incurred in a lawyer's capacity as agent for a particular client. Examples are charges paid by the lawyer for registration fees, land transfer tax in a real estate transaction, etc. The sales taxes are entered as charged and collected by the vendor as part of the transaction and disclosed for client's claim of input tax credit. No additional taxes are applied by the firm and vendor charged taxes are not included in lawyer's input tax credit.



  • Expense paid from a checking account:

    • On Matter Screen > Select Matter > Hard Cost > Complete upper portion of card, e.g. date, amount, tax, total amount, vendor, check #(if not printing), etc.

    • Check “Disbursement Incurred As Agent”

    • Do not check “Taxable” as firm cannot add taxes to Disbursement Incurred As Agent (Explained above). System will not let you save the disbursement if “Taxable” checked

  • Complete bottom portion of card (Expense, Attorney, Billing Status, Description) and click Save.

  • Resulting Expense Card amount is net of vendor taxes and vendor taxes will be shown separately on the invoice to enable the client’s claim of input tax credit.

  • Expense paid by Credit Card:

    • Follow instructions above for expenses paid by checking account, with this difference:

    • Bank > select credit card bank

    • Note “Type” changes to CC Charge.  Reference number can be alpha-numeric.

  • Expenses to be paid later (Accounts Payable)

    • On Accounting Screen > Accounts Payable > Add >Complete upper portion of card, e.g. bill date, due date, amount, tax, total amount, vendor, memo

    • Check “Post as matter Expense” > Select Matter > Complete section

    • If holding vendor payment, e.g. hospital expenses, until after settlement, check “hold bill payment until client invoice is paid in full”



How to Disbursements “Not Incurred As Agent”


Note: Per CRA P-209R, the phrase “not incurred as agent” indicates that the disbursement described is generally incurred otherwise than in a lawyer's capacity as agent for a particular client. Examples are Travel expenses, postage, telephone, couriers, and photocopying.  These are input to the legal services and thus sales taxes paid and collected are used for lawyer's input tax credit.


 Using the steps for entering expenses to matters above, complete the card through “Account”

  • Leave “Disbursement Incurred as Agent” box unchecked.

  • Default is kept as “Taxable” so firm can enter taxes paid. For non-taxable disbursements, you can uncheck “Taxable”. See image above. 

  • Resulting Expense Card amount would be NET of firm paid taxes. Taxes will be added back to the expense card based on “Taxable” flag as well as default tax rates. 


Note on Taxability of Disbursements “Not Incurred As Agent”


Normally, Disbursements “Not Incurred As Agent” are entered and you specify taxes paid by the firm and keep resulting expense card taxable. Normally, tax paid and billed is identical and flows through lawyer’s input tax credit. However, if the location of where cost was incurred or your client’s location is outside of the GST jurisdiction, you may have following legitimate situations (CosmoLex allows disbursement entry for all of these situations):

  • You have paid taxes but billing to your client’s is kept non-taxable (e.g. when your client is out of the GST jurisdiction).

  • You did not pay taxes but billing to your client is taxable (e.g. when you incurred cost out of the GST jurisdiction).

  • Tax rate you were charged and what you are required to charge are different.



Special Note on entering Disbursements “Not Incurred As Agent” in British Columbia


As PST is not recoverable in BC, our default account for Firm Paid PST is 6660: PST Paid on Operating Expenses, an expense account. When entering Disbursements “Not Incurred As Agent” in British Columbia, following changes should be made to the process listed above:


  • When entering the amount, enter expense net of GST taxes. Do not separate out PST or other local taxes as those are not recoverable.

  • Resulting expense card would be NET of taxes paid and by default would be taxable. Manually edit the card and remove PST tax as PST has already been billed to the client in step above. 

  • If this process is not followed properly the following scenarios may happen:

    • If you separated out paid PST and keep the expense card taxable, end-client will pay normal amount. However, in your books reimbursement would be booked as PST Collected in a liability account but PST paid would be in an expense account. Manual journal entries would be required to correct the mistake.

    • If you follow the process but do not remove PST from expense card, client will end-up being billed for PST twice (one as passthrough in the cost and another as added by the firm).

  • For additional detail, see the examples as shown by the Law Society of British Columbia in article:  https://learnlsbc.ca/node/692 


Special Note on entering Disbursements “Not Incurred As Agent” in Quebec


As QST is recoverable in Quebec, our default account for Firm Paid QST is 2212: QST Paid, a contra liability account. You should separate out GST and QST when doing the cost allocation and keep the expense card taxable.