100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Previously searched by you
Previously searched by you
logo
Summary Solicitors Accounts SQE1 CA$12.02   Add to cart
Quickly navigate to
Preview
  2.  
  3. SQE1
  4.  
  5. SQE1
  6.  
  7. SQE1

Summary

Summary Solicitors Accounts SQE1

1 review
 44 views  1 purchase
  • Course
  • SQE1
  • Institution
  • SQE1

Clear, precise, detailed, yet concise, Solicitors Accounts summary for SQE students. I have devoted so much time and energy to writing these notes-summaries that eventually they paid off. Not only they allowed me to pass my PDGL with a distinction, but they were key to studying for the SQE exam. My...

[Show more]

Preview 4 out of 34  pages

Document information

  • January 26, 2024
  • 34
  • 2023/2024
  • Summary

Subjects

  • solicitors accounts sqe1
  • sqe accounting
  • solicitors accounts ulaw
  • solicitors accounts summary
  • solicitors accounts sqe prep course

Written for

  • SQE1
  • SQE1
  • SQE1
All documents for this subject (160)

1  review

review-writer-avatar

By: klarampel2000 • 4 months ago

Seller

avatar-seller
camillacerciello

Reviews received

Content preview

Solicitors Accounts – Course Notes:

DOUBLE ENTRY BOOKKEEPING AND THE SRA ACCOUNTS RULES:

‘Accounts’: day-to-day records of a firm’s financial transactions = summaries of financial information.
All firms follow the same standard process for recording financial transactions in their accounts.
Law firms (≠ other businesses) hold money which belongs to other people, ie firm’s clients —> must adhere
to rules on the proper handling of clients’ money and the keeping of accounting records.

Double entry bookkeeping:

‘Bookkeeping’: process of recording financial transactions in accounts of a law firm.
Double entry bookkeeping system: used by all firms to record their day-to-day transactions.

Principles of double entry:

Premise: every financial transaction has two aspects to it and both aspects need to be recorded.
Examples:
The firm pays cash to buy premises: The firm pays staff wages:
Aspect 1 – The firm has less cash Aspect 1 – The firm has less cash
Aspect 2 – The firm has acquired an asset in the form of premises Aspect 2 – The firm has incurred an expense
The firm bills a client for work done: The client pays the firm the money owed:
Aspect 1 – The firm has earned income Aspect 1 – firm has lost the debt that was owing to it
Aspect 2 – The firm has a debt (the amount of the bill) owing to it Aspect 2 – firm has more cash

Each aspect must be recorded in a different account.
 System requires to have a number of separate accounts: ie one for cash, one for each type of asset, one
for each type of expense, one for each creditor (and same for debtor) etc.
 Each account is divided in two sides (to reflect both aspects of the transaction).

Rules for recording transactions:

Left column Right column
Expense incurred Income earned
Asset acquired/increased Asset disposed of/reduced
Liability reduced/extinguished Liability incurred/increased
Cash gained Cash paid

Every transaction has two aspects.
 Recording an individual transaction:
o one aspect appears in the left-hand column of the grid —> will be recorded on the left-hand
side of one account.
o other aspect appears in the right-hand column of the grid —> will be recorded on the right-
hand side of another account.
o == each aspect recorded in two separate accounts.




1

,Transactions are simply recorded as they occur: system is a mechanical method of recording transactions as
they happen and involves no value judgements about the state of the business.

The business owner:

Important principle of double entry bookkeeping: the business is regarded as completely separate from its
owner or proprietor.
Transactions must be recorded from the point of view of the business - ie owner sets up business and puts in
some cash: (1) the business is gaining cash, and (2) it’s incurring a liability (to repay its proprietor).

Debit and credit:
System uses the labels ‘Debit’ and ‘Credit’ for the two sides of the accounts.
 Debt: left-hand side - DR
 Credit: right-hand side - CR

—
The form of accounts:

Accounts may be presented in a variety of different forms. The most common is the tabular form:

Name of account
Date Details DR CR Balance



 Transaction is recorded = entered in ‘Date’ column
 ‘Details’ column contains a cross-reference to the name of the account where the other part of the
double entry is made, often with a brief description of the nature of the transaction.
 Amount involved: entered either in ‘DR’ or ‘CR’ column, as appropriate.
 ‘Balance’ column: shows the running balance on the account.
o If DR entries exceed CR entries, the balance is described as a DR balance, and vice versa.

Example:

A firm pays three electricity bills: £1,000, £2,000 and £3,000. Each payment will be recorded on the
electricity account and the cash account.

The electricity account will show debit entries as the business is incurring an expense:




Corresponding entries in the cash account as credit entries because the business is paying cash:
2

,—

Making entries:

Every financial transaction must be recorded in the accounts of the business as it happens.

When a bill is issued, a solicitor will need to record the two aspects of the transaction. The first aspect is the
sale of the solicitor’s services and the second aspect is the gain of the debt now owed by the client to the firm.

Charges for professional services:
 CR entry on ‘profit costs’ (income account).
 DR entry on client account.

When client pays: solicitor will record a receipt of cash and the loss of the debt owed by the client to the firm.

Important: no entry is made on the profit costs account when the client pays the cash due = the profit costs
account merely records the bill issued. It does not show whether or not clients have paid their bills.

Example:

Miriam, a solicitor, sets up a business as a sole practitioner. The following financial transactions occur:
June
1) Miriam starts a business and puts in £10,000 cash
2) Business buys a computer for £2,000
3) Business pays rent of £1,000
To record these events the business will need the following accounts:
– a capital account
– a cash account
– an asset account for the computer
– an expense account for rent

—
Cash and ledger accounts:

‘Cash’ account (aka ‘cash sheet’/‘cash book’): record of receipts into and payments out of the bank account.
 Firm needs small amount of cash to cover day-to-day expenses - ie ‘petty cash’ account: required to
record the periodic receipts of cash from the bank and the various payments made from petty cash.
Traditionally, accounts were kept together in a bound book referred to as the ‘ledger’.

—
SRA Accounts Rules:
(part of SRA Standards and Regulations)

The nature of the Rules:

Purpose: ensure that money belonging to clients is safe and kept separately from money belonging to the firm
—> reduce the risk of accidental or deliberate misuse of clients’ money.

In many instances it is left to individual firms to interpret Rules and apply them in an appropriate manner.
3

, Risk-based approach, Rules becoming more prescriptive in areas where the risk to clients’ money is higher.

Breach of Rules: disciplinary matter which may result in SRA taking action against individuals and/or firms.
 The SRA regards misconduct involving dishonesty or the misuse of clients’ money as serious.

Rules - key principles and requirements for keeping client money safe, including:
(i) keeping client money separate from the firm’s own money;
(ii) ensuring client money is returned promptly at the end of a matter;
(iii) using client money only for its intended purpose; and
(iv) proportionate requirements for firms to obtain an annual accountant’s report.

Principles governing the Rules:

The SRA Principles apply to all aspects of practice, including the regulation of Accounts:
1. Uphold constitutional principle and rule of law + proper admin of justice
2. Uphold public trust and confidence in the profession
3. Act with independence
4. Act with honesty
5. Act with integrity
6. Act in a way that encourages equality, diversity and inclusion;
7. Act in the best interests of each client.

Who is bound by the Rules?

Rule 1 states that the Rules apply to authorised bodies, their managers and employees, and references to ‘you’
in the Rules should be read accordingly.

The authorised body’s managers are jointly and severally responsible for compliance with the Rules by the
authorised body, its managers and employees

In relation to a licensed body, the Rules apply only in respect of activities regulated by the SRA in accordance
with the terms of its licence.

————
CLIENT MONEY AND CLIENT ACCOUNTS:

Client money:

Rules 2–4 set out what an authorised body (‘a firm’) must do with client money as defined in Rule 2.1.
Rule 4.1 requires client money to be kept separate from the money belonging to the firm.

‘Client’ is defined in the Glossary as ‘the person for whom you act’.

Rule 2.1 states that client money is money held or received by a firm:
a. relating to regulated services delivered by you to a client;
b. on behalf of a third party in relation to regulated services delivered by you (such as money held as
agent, stakeholder or held to the sender’s order);
c. as a trustee or as the holder of a specified office or appointment, such as donee of a power of attorney,
Court of Protection deputy or trustee of an occupational pension scheme;
d. in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for
the same.

Case law: a solicitor has a duty to clarify any ambiguity as to whom client money is held for.

 ‘Fees’: ‘your own charges or profit costs (including any VAT element)’.
 ‘Disembursements’: ‘any costs or expenses paid or to be paid to a third party on behalf of the client
or trust (including any VAT element) save for office expenses such as postage and courier fees’.

4

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller camillacerciello. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$12.02. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

67474 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
CA$12.02  1x  sold
  • (1)
  Add to cart