Solicitor’s Accounts Exam Prep
Exam:
Client ledger and comprehension questions – 64 marks total
Financial statement – 16 Marks
5 MCQ Questions – 20 marks.
SRA Accounts Rules:
Rule 2: Client money.
2.1 Client money is money held or received by you (‘you” means the firm/authorised bodies)
(a) relating to regulated services delivered by you to the client,
(b) money held as agent, stakeholder or held by the senders’ order,
(c) as a trustee or holder of specified office,
(d) in respect of your fees or any unpaid disbursements.
2.3: you ensure client money is paid promptly into a client account.
Exceptions: 2.3(c) you agree in individual circumstances an alternative arrangement in writing with
the client or 3rd party for whom money is held.
Example - A firm receives a cheque made out to the firm from a client, X, for £200 generally on
account of costs and disbursements. Client X asks the firm not to pay the money into the firm’s bank
account until X instructs the firm to do so. Answer: general rule is 2.3 money paid in promptly, but
exception in 2.3(c) could apply here. Would have to be written confirmation. Rule 8.1 must record
this receipt.
2.5: Client money returned promptly to the client as soon as no longer any proper reason to hold
those funds.
Rule 3: Client Account
3.1: maintain client account at branch of bank or building society.
3.2: Name of client account includes: name of authorised body and word ‘client’.
3.3: Must not use client account to provide banking facilities.
Rule 4: Client money must be kept separate
4.1: keep client money separate from money belonging to authorised body
4.2: allocate promptly any funds from mixed payments you receive to the correct client or business
account.
Example – Client X sends £500, £300 on account of costs, £200 to pay professional charges. The
firm’s bank does not allow cheques to be split. Following rule 4.2 would pay all into either the
business or client account and then promptly transfer the correct funds to the other.
Rule 5: Withdrawals from client account
5.1: you only withdraw client money from client account
(a) for the purpose for which it is being held,
(b) following receipt of instructions from client or 3 rd party for whom money is held,
(c) on SRA’s prior written authorisation or in prescribed circumstances.
5.3: only withdraw money if sufficient funds are held on behalf of that specific client to make the
payment.
Example – Cheque for £500 that client X has given you has been dishonoured. Answer: As cheque
dishonoured may breach 5.3 unless remedied. Rule 6.1 deals with correcting breaches upon
discovery. Firm must transfer the funds to deal with breach. DR client side of the client ledger to
reverse the entry made on breach date.
, Rule 7: Payment of interest
7.1: account to clients for a fair sum of interest on any client money held by you on their behalf.
7.2: may by written agreement come to a different arrangement with client.
Rule 8: Client accounting systems and controls
8.1: You keep and maintain an accurate, contemporaneous, and chronological records to:
(a) record in client ledgers identified by the client’s name and an appropriate description of the
matter to which they relate.
Example – Client X sends cheque for £600. Rule 8.1(a) You must record receipt of the cheque by
making a CR entry on the client side of client X client ledger.
8.2: You obtain at least every 5 weeks, statements from banks, building societies and other financial
institutions for all client accounts and business accounts operated by you.
Rule 11: Third party managed accounts
11.1: may enter into arrangement with a client to use a 3 rd party managed account.
Money held in such accounts is outside the definition of client money and is not subject to SRA
accounts rules 2019.
Interest in these accounts will be ‘real’ interest at the bank’s own rate.
Client Ledger Question:
Client: Business Client
Matter:
DATE DETAILS DR CR BAL DR CR BAL
Insert ‘month’ and then dates numbers after. Always update the balance.
Client will be in the question, if
Stakeholder ledger will be ‘client + buyer’ as
An example.
Examples of where to put entries:
1. ‘The firm pays £200 in probate fees’ – Business side of ledger, DR, then update balance.
2. ‘The proceeds of a life policy (£60,00) on the deceased’s life are received’ – Client side of
ledger, CR, update balance.
3. ‘Stamp duty land tax of £1,000’ – Client side of ledger, DR, update balance.
4. ‘The firm sends a bill for their professional charges of £400 + VAT’ – we need 2 separate
columns here, one for ‘profit costs’ this is the professional charges of £400, under business
side of ledger, DR, update balance. The second column for VAT, this currently stands at 20%
so would be £80, business side, DR, update balance.
Tips:
How many ledgers does the question ask for? How many clients? Lender’s ledger,
stakeholder ledger etc.
If ledger goes onto new page, start next row showing ‘balance’.
, Financial Statement:
Example for property sale and purchase –
FINANCIAL STATEMENT [DATE]
TO: [INSERT NAME]
Sale of [Property name]
£ £
Sale Price XXX
Less
Mortgage redemption XXX
[ Total]
Professional charges XXX
VAT XXX
Available from sale XXX
Purchase of [Property name]
Purchase price XXX
Furnishings (if any) XXX
Less
Pre-paid deposit XXX
Mortgage advance XXX
[ Total]
Plus
Professional charges on purchase XXX
