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Solicitors Accounts - LECTURE AND REVISION NNOTES
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OfficialSOLICITORS ACCOUNTS ONLINE LECTURE
- RULE 4.1 A FIRM HAS TO KEEP CLIENT MONEY SEPARATE FROM MONEY BELONGING TO THE
FIRM
- THE PREAMBLE (INTRODUCTION) TO THE SRA ACCOUNT RULES SAYS FIRMS WILL NEED TO
HAVE SYSTEMS AND CONTROLS IN PLACE TO ENSURE COMPLIANCE WITH THE RULES.
MEANING OF CLIENT MONEY (4 TYPES OF MONEY HELD BY OR RECEIVED BY THE FIRM)
2.1 – CLIENT MONEY IS MONEY HELD OR RECEIVED BY THE FIRM
- RELATING TO REGULATED SERVICES (THE LEGAL AND OTHER PROFESSIONAL SERVICES THAT YOU
PROVIDE THAT ARE REGULATED BY THE SRA AND ALSO INCLUDES ACTING AS A TRUSTEE OR
HOLDER OF A SPEFIED OFFICER APPOINTMENT E.G OFFICER OF THE COURT)DELIVERED BY THE
FIRM TO A CLIENT (THIS WILL COVER VAST MAJORITY OF WORK SOLICTORS WILL COVER FOR THE
CLIENT WHATEVER DEPARTMENT IT MAY BE) IF THE CLIENT DOESN’T END UP BUYING A STAKE FOR
EXAMPLE – THE MONEY WILL STILL BE HELD AS CLIENT MONEY
- ON BEHALF OF A THIRD PARTY IN RELATION TO REGULATTED SERVICES DELIVERED BY THE FIRM
(SUCH AS MONEY HELD AS AGENT, STAKEHOLDER OR HELD TO THE SENDERS ORDER) E.G DEPOSIT
FOR A PROPERTY PURCHASE WHICH WILL BE DELIVERED BY THE SELLERS SOLICITOR ON THE
MORNING OF EXCHANGE BEFORE CONTRACTS HAVE EXCHANGED – THAT IS NOT MONEY THAT
BELONGS TO THE FIRM NOR THE SELLERS CLIENT, UNDER THESE RULES ITS CLASSED AS CLIENT
MONEY)
- AS A TRUSTEE OR AS THE HOLDER OF A SPECIFIED OFFICE OR APPOINTMENT, SUCH AS A DONEE
OF A POWER OF ATTORNEY, COURT OF PROTECTION DEPUTY OR TRUSTEE OF AN OCCUPATIONAL
PENSION SCHEME
- IN RESPECT OF YOUR FEES AND ANY UNPAID DISBURSEMENTS IF HELD OR RECEIVED PRIOR TO
DELIVERY OF A BILL FOR THE SAME TIME (FEES MEAN YOUR OWN CHARGES OR PROFIT COSTS INC
VAT, DISPERSEMENT WHICH IS ANY COST OR EXPENSE PAID OR TO BE PAID TO A 3 RD PARTY ON
BEHALF OF THE CLEINT OR TRUST INC VAT, BUT DOES NOT INCLUDE OFFICE EXPENSES LIKE POSTAGE
OR COURIER FEES AS THOSE ARE FACTORED INTO THE HOURLY RATE THAT A LAW FIRM CHARGES TO
ITS CLIENT FOR THE WORK IT DOES) E.G PAYMENT MADE TO EXPERT WITNESS IN COURT
PROCEEDINGS – THE KEY POINT TO NOTE IS THAT ONCE A BILL HAS BEEN DLEIVERED TO A CLIENT,
THIS MONEY STOPS BEING CLIENT MONEY UNDER THE RULES.
IF A FIRM HOLDS OR RECEIVES ANY MONEY FALLING WITHIN THESE CATEOGIRES, IT HAS TO BE
KEPT SEPARATE FROM ANY MONEY BELONGING TO THE FIRM
OFFICE MONEY = FIRM MONEY - CLIENT MONEY = MONEY BELONGING TO THE CLIENT
RULE 2.1
LAW FIRMS NEED TO HAVE 2 SEPARATE BANK ACCOUNTS
- OFFICE ACOUNT TO HOLD FIRMS MONEY
, Official
- CLIENT ACCOUNT TO HOLD CLIENT MONEY
3.1 – THE CLIENT ACCOUNT HAS TO BE AT THE BRANCH OF A BANK OR BUILDING SOCIETY IN
ENGLAND AND WALES – HAS TO INCLUDE NAME OF THE FIRM AND HAS TO USE THE WORD CLIENT
TO DISTINGUISH IT FROM ANY OTHER ACCOUTNS HELD AT THE FIRM. THIS IS NOT A BANK ACCOUNT
WHICH BELONGS TO ANY CLIENT IT BELONGS TO AND UNDER THE CONTROL OF THE LAW FIRM
EVEN THOUGH ALL IT CONTAINS IS MONEY THAT BELONGS TO THE LAW FIRMS CLIENTS.
DOUBLE ENTRY BOOKKEEPING
- ISSUED GUIDANCE TO FIRMS TO HELP THEM MINIMISE ERRORS IN ACCOUNTING AND
INCREASE LIKELIHOOD OF THE BOOKS BALANCING
- WHAT THEY HAVE DONE IS RECOMMENDED THAT LAW FIRMS ACCOUNT BOOKS ARE
MAINTAINED ON THE DOUBLE ENTRY PRINCIPLE.
- IT MEANS EVERY TRANSACTION AT A LAW FIRM HAS TO BE RECORDED TWICE IN SEPARATE
LEGERS (ONLINE BOOK) THAT THE LAW FIRM MAINTAINS
- ANY ENTRY MADE IN A CREDIT COLUMN OF ONE BOOK (LEDGER) HAS TO BE MATCHED
AND PLACED IN THE DEBIT COLUMN OF ANOTHER BOOK (LEDGER)
- THE IDEA IS THAT THESE MATCHING ENTRIES MATCH EACHOTHER OUT IF YOU HAVE DONE
YOUR JOB PROPERLY
- IF YOU ADD UP ALL THE CREDIT COLUMNS IN EACH LEDGER IT WILL TOTAL THE DEBIT
COLUMNS IN EACH LEDGER
- LESS LIKELIHOOD OF A TRANSACTION NOT BEING ACCOUNTED FOR BECAUSE IF THEY DON’T
MATCH YOU CAN RETRACE YOUR STEPS AND WORK OUT WHERE THE ERROR HAS
OCCURRED.
- EVERY TRANSACTION RELATING TO CLIENT MONEY HAS TO BE RECORDED IN 2 PLACES, THE
CLIENT CASH LEDGER WHICH IS THE LEDGER WHICH REPRESENTS WHATS GOING ON IN THE
BANK ACCOUNT, AND THEN THE CLIENT LEDGER WHICH DETAILS WHICH PARTICULAR
CLIENT THAT TRANSACTION RELATES TO.
- THESE LEDGERS NEED TO CONTAIN NARRATIVES ALONGSIDE EACH ENTRY TO IDENTIFY AND
PROVIDE ADEUQATE INFO ABOUT THE TRANSACTION. ITS ALSO RECOMMENDED THAT THE
CURRENT BALANCE IF ITS NOT SHOWN IN THE CLIENT LEDGER ACCOUNT SHOULD BE
READILY ASSERTAINABLE BUT WE INSIST ON KEEPING A RUNNING BALANCE OF ANY OF
THE PARTICULAR CLIENT LEDGERS. ENTRIES MADE IN CHRONOLOGICAL ORDER AND
RECORD THE DATE OF THE UNDERLYING TRANSACTION.
WORKBOOK HAS MORE INFO ON ALL OF THE ABOVE.
THE BANK ACCOUNT LEDGER (1 PART OF DOUBLE ENTRY EXAMPLE)
IN LEDGER BOOKS ALWAYS USE OFFICE CASH AND CLIENT CASH TERMINOLOGY
- DR = DEBIT COLUMN
- CR = CREDIT COLUMN
- DETAILS = INCLUDE A NARRATIVE IDENTIFYING AND PROVIDING ADEQUATE INFORMATION
ABOUT THE TRANSACTION HERE
- 2 LEDGERS COMBINED INTO ONE – OFFICER CASH AND CLIENT CASH
- OFFICE CASH = FIRM MONEY
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