This revision document is for the core Solicitors Accounts unit featured on the LPC. It is a comprehensive step-by-step guide, which allows you to tackle an accounts exam. This revision manual strives to offer notes that are both clear and useful. Given that they summarise important subject areas t...
REMEMBER
- ONLY TAKE MONEY OUT FROM CLIENT SIDE, IF THEY HAVE GIVEN MONEY FOR
COSTS.
- ALSO REMEMBER TO RE ADD THE VAT PAID WITH THE PROFIT COSTS AT THE END.
- CASH BALANCE BACK TO CLIENT = DR CLIENT SIDE AMOUNT TO RETURN, 0 BALANCE
CLIENT SIDE.
- Every transaction will be recorded twice, double entry system.
1. Benefits to firm/account (money comes in) = DR
2. Consideration out of/account (money leaves) = CR
There are 3 types of account:
a. Personal Accounts = for each individual, firm or company dealing with the
business. Name after the individual.
Personal Accounts (records indebtedness)
- DR – increase of amount owed to firm
- CR – reduction of amount owed to firm
- e.g. VAT charged = CR
- e.g. Client’s ledger - money in = CR
- e.g. Client’s ledger - money out = DR
- REDEEM DEPOSIT - DR
b. Real/Asset Accounts = something with a degree of permeance. Name it
after the asset.
- Examples = Cash, Motor cars, Premises , Library, Business Equipment
- Money/Asset IN (or benefit) = DR
- Money/Asset Out (consideration) = CR
- In details put cash
c. Nominal Income and Expense Accounts = This is based on the fees charged
in respect of work done for clients
*INCOME ACCOUNT = USUALLY KNOW AS THE PROFIT COSTS ACCOUNT
- DR – records extra expense
- CR – records extra income
e.g. Rent (Rent expense account)– payment = DR (benefit of electricity)
e.g. Profit costs charged = CR (consideration we have given out)
e.g. Wages – payment = DR
, e.g. stationary (expense – used up, credit)
When the firm charges a client + VAT
- Personal account = owed to the firm = DR(business only)
- Profit cost (business only) = owed to the firm = CR
- Personal account = VAT owed (20%) = DR (add to balance)
- Personal account HMRC = VAT = CR
e.g.
, When the client pays the bill
- Personal ledger = CR = make balance nil
- Cash account = receives money DR
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