Exam (elaborations)
Solicitors accounts
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Solicitors accounts1.1 - ANSWER Overarching objective: keep client money safe
1.2(a) - ANSWER Must keep client money separate from office money by using separate
client account
13.2
12.8 - ANSWER Money held or received on behalf of the principal is office money
12.8(a) - ANSWER If partner buying using mortgage and firm instructed by mortgage lender
then client account
12.8(b) - ANSWER If partner buying jointly with spouse then client account
12.8(c) - ANSWER If partner acting for employee then client account
13.2 client account - ANSWER Bank account for client money
14.1 - ANSWER Client money must be paid into client account
14.2 - ANSWER rare occurrence when put office money into client account e.g. Money paid
in error out of client account
14.5 - ANSWER Client money received and paid into client account must relate to the work
the solicitor is carrying out for the client
20 - ANSWER When you can pay money out of the client account:
1. Required for payment to or on behalf of the client
2. Disbursements
3. To reimburse the solicitor
4. Transferring money between ledgers
5. Money drawn on clients instructions in writing
6. To pay solicitors bill of costs
7. Mixed money rule
29 - ANSWER Every solicitor must keep properly written up accounts
29.2(b) client ledger - ANSWER Separate ledger for each individual client recording how
much money the solicitor holds on behalf of that particular client
29.4 Office ledger - ANSWER Separate ledger for each client recording how much money
that client owes the solicitor
31 - ANSWER SRA monitors and investigates solicitor compliance with the riles
32-45 - ANSWER Accountants must do reports
3rd party payments - solicitor acting as agent - ANSWER 1. the solicitor should not account
for the VAT separately, only for the gross (VAT-inclusive) amount of the payment; and
, Solicitors accounts
2. the payment should be made out of client money where possible
3rd party payments - solicitor acting as principal e.g. - ANSWER Payment of the
accountant's invoice by the solicitor:
DR office ledger with the net amount
CR office cash
+
DR VAT account with the VAT
CR office cash
Then Solicitor invoices the client for the accountant's costs when send bill:
DR office ledger with the profit costs
CR profit costs
+
DR office ledger with VAT
CR VAT account
Abatement of costs - ANSWER CR office ledger for the client with the abatement in costs
(excluding VAT)
DR profit costs with the abatement in costs (excluding VAT)
+
CR office ledger for the client with the VAT on the abatement
DR VAT account with the VAT on the abatement
Agent deposits: money seller's from exchange - ANSWER Receipt of deposit cheque:
CR client ledger: seller client
DR client cash
Payment of deposit cheque to seller:
DR client ledger: seller client
CR client cash
Bad debts - ANSWER CR office ledger for the client, with the amount of the unpaid debt
(excluding the VAT amount)
DR bad and doubtful debts account
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