Professional fees are prices charged by individuals specially trained in specific fields of arts and sciences, such as doctors, architects, lawyers, and accountants. "Professional Fees" is usually an income account used by a professional firm in recording its revenues.
Professional Fees is a revenue account. It is presented in the first part of the income statement under revenues.
Some businesses use Professional Fees as an expense account to record costs incurred in employing the services of outside professionals. Businesses are free to choose any account title to use in their accounting system.
Nonetheless, Professional Fees are usually maintained as the main revenue account of firms offering professional services (accounting firms, law firms, doctors, engineers, architects, etc.).
The pro-forma entry for professional fees is:
|Dr.||Cash / Accounts Receivable||xx.xx|
Whenever service is rendered, Professional Fees is credited. It is a revenue account, hence to increase the account, it is credited.
The corresponding debit depends upon the terms of collection. Cash is debited if the client pays the full amount in cash. Accounts Receivable is debited if it is to be collected at a later date. Notes Receivable is debited if the client issues a promissory note.
If the client pays partially, a portion is debited to Cash and a portion to Accounts Receivable.
1. On January 5, 2020, EYG Accountants and Consultants performed bookkeeping services and collected the entire amount in cash, $1,000.
2. On January 12, 2020, TCA Legal Company performed services for an old client for a total professional fee of $1,200. It was agreed that the amount will be paid after 30 days.
3. On January 20, 2020, Dr. Jones performed surgery for $2,500. The patient paid half of the professional fee and the balance will be paid on the next scheduled check-up.
The cash collected is recorded by debiting Cash; the amount still to be collected is recorded with a debit to Accounts Receivable.