Summary Solicitor Accounts LPC *(2020)* Full Notes with Examples *Distinction 94%*

Solicitors Accounts Condensed Notes


RULE 1: DOUBLE-ENTRY BOOKKEEPING
 Every transaction requires 2 entries (i.e. double entry), one in debit + other credit column
 Cashbook records relationship between business + bank cheques, transfers, bankers draft, cash
E.g. Peter sells computers on 5th Sep for £1000 cash
Peter pays rent on premises on 6th Sep of £600
Cashbook
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Balance b/d 6,000.00Dr
Sale 1000.00 7,000.00Dr
6 Rent 600.00 6400.00Dr

Sales account
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Balance b/d 15,000.00Cr
Cash 1000.00 16,000.00Cr

Rent
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Balance b/d 1,800.00Dr
6 Cash 600.00 2,400.00Dr

RULE 2: CREDIT TRANSACTIONS
 First record that have billed somebody (1st 2 entries) as no money in NOT in cashbook so entry
(1) in ‘cost/sale account’ and entry (2) in specific person/bus account
 Receive: put it into cash book (2nd 2 entries) entry (1) cash book + entry (2) in person/bus acc
 4 entries for credit transactions
E.g. 5th Sep Michael, an accountant sends Sid an invoice for £6000 for accountancy services
23rd Sep Michael receives a cheque from Side for £6000

Cashbook Overdrawn (reduces overdraft)
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Balance b/d 7,000.00Cr
23 Sid 6000.00 1,000.00Cr

Costs account
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Balance b/d 9,000.00Cr
Sid 6000.00 15,000.00Cr

Sid shows Sid owes us
Date Detail Debit (£) Credit (£) Balance (£)
Sep 5 Cost 6,000.00 6,000.00Dr
23 Cash 6000.00 0.00




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, Solicitors Accounts Condensed Notes


RULE 3: VAT IN ‘CASH’ TRANSACTIONS
 4 entries: 1 set of double entries for the net sum and another set for VAT charge
 Entries (1) in ‘cashbook’ of net sum and entry (2) in cash book of VAT, entry (3) in VAT ledger and
entry (4) in sale/purchase or specific ledger
 Sold goods= debit in ‘cashbook’ (and VAT in debt) and credit in ‘VAT’ and credit in ‘sale account’
 Purchase goods= credit in cash book (and VAT in credit) and debit in VAT stock/relevant ledger

Sold goods – e.g. George Sold goods for cash for £200 + VAT
Cashbook
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 5,000.00Dr
Sales 200.00 5,200.00Dr
VAT 40.00 5,240.00Dr

VAT account (HM Revenue & Customs)
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance 0.00
Cash 40.00 40.00Cr

Sales account
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 6,000.00Cr
1 Cash 200.00 6,200.00Cr

Purchase goods – e.g. George bought stock for cash for £900 + £180 VAT
Cashbook
Date Detail Debit (£) Credit (£) Balance (£)
2 Purchases 900.00 4,340.00Dr
VAT 180.00 4,160.00Dr

VAT account (HM Revenue & Customs)
Date Detail Debit (£) Credit (£) Balance (£)
2 Cash 180.00 140.00Dr


Purchases (of stock)
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 2,000.00Dr
2 Cash 900.00 2,900.00Dr




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, Solicitors Accounts Condensed Notes


RULE 4: VAT IN ‘CREDIT’ TRANSACTIONS
 6 entries  (1) invoice (cost + VAT) , (2) individuals Acc & (3) receipt (cashbook + individual Acc)
 Invoice: Entry (1)= cost account of principal sum (credit); Entry (2)= VAT account (credit)
 Indiv Acc: Entry (3) net sum and Entry (4) VAT both as debit on individuals account
 Receipt: Entry (5) cashbook (debit) and Entry (6) individual account (credit)
E.g. Aug 1: George issued an invoice to Martha for services for £1,200 plus £240 VAT
Aug 10: George received a cheque for £1,440 from Martha

Aug 16: George issued a bill to Grays Litho for services for £1,500 + £300 VAT
Aug 20: George received a cheque for £2,300 from Grays Litho

Cashbook
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 3,000.00Dr
10 Martha 1,440.00 4,440.00Dr
20 Grays Litho plc 2,300.00 6,740.00Dr

VAT account (HM Revenue & Customs)
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance 0.00
1 Martha 240.00 240.00Cr
16 Grays Litho plc 300.00 540.00Cr

Costs account
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 3,000.00Cr
1 Martha 1,200.00 4,200.00Cr
16 Grays Litho plc 1,500.00 5,700.00Cr

Martha
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Costs 1,200.00 1,200.00Dr

VAT 240.00 1,440.00Dr
10 Cash 1,440.00 0

Grays Litho plc
Date Detail Debit (£) Credit (£) Balance (£)
Aug 1 Balance b/d 500.00Dr
16 Sales 1,500.00 2,000.00Dr
VAT 300.00 2,300.00Dr
20 Cash 2,300.00 0.00




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, Solicitors Accounts Condensed Notes


RULE 5: DUAL LEDGERS & RECORDING RECEIPTS AND WITHDRAWALS
 Client money v office money
 Note: same rules with double entry, look if cashbook or individual client account, remember
‘cashbook’ records all office and all clients money then see individual client account to see if
there is money to pay for any costs (for client), if not use office money

RECORDING RECEIPTS OF MONEY
E.g. Received cheque £2,000 from Matrix for accounts of cost on 15 th Sep
 Entry (1): client money came into firm, into cashbook in ‘debit’ in client account
 Entry (2) put as credit into individual ledger in client account

E.g. Cardorn pays for a local search for purchase of new premises, fee is £150
 Check If money in client acc to pay, if not use office money here use office money
 Entry (1) cashbook in office credit amount + Entry (2) into client ledger in office acc as debit

Cash book.
Office account Client account
Date Detail Dr (£) Cr (£) Balance (£) Dr (£) Cr (£) Balance (£)
15/9 Balance b/d 9,000.00Cr 98,000.00Dr
Matrix Ltd 2,000 100,000.00D
r
16/9 Cardorn Ltd 150.00 9,150.00Cr


Client name: Matrix Limited Matter: Purchase of new business
Office account Client account
Date Detail Dr (£) Cr (£) Balance (£) Dr (£) Cr (£) Balance (£)
15/9 Cash: on a/c 2,000 2,000.00Cr
of costs

Client name: Cardorn plc Matter: New premises
Office account Client account
Dat Detail Dr (£) Cr (£) Balance (£) Dr (£) Cr (£) Balance (£)
e
2/9 Cash: Comm 16.00 16.00Dr
search
Cash: local
16/9 search 150.00 166.00Dr




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