ACCOUNTING AUDITING SOLICITORS ACCOUNTS

Table of Contents SRA Guidance Notes...........................................................................................................2 Key Terminology................................................................................................................4 Who do the SRA Accounts Rules apply to?..........................................................................5 Client Money v Office Money.............................................................................................5 Application of distinction...................................................................................................7 Client Accounting...............................................................................................................9 Double-Entry Bookkeeping...............................................................................................10 Property Transactions......................................................................................................19 Accounting for VAT...........................................................................................................26 Dishonoured Cheques.......................................................................................................38 Incurred but unpaid costs / expenses and SRA Accounts Rules..........................................39 Accounting for Interest and Sums in Lieu of Interest.........................................................40 Financial Statements .......................................................................................................44 SOLICITORS ACCOUNTS SRA Guidance Notes SRA has issued guidance notes on the following topics, all of which are included in the Handbook:  Accountant’s report and the exemption to obtain one  Do I need to operate a client account?  Helping you keep accurate client accounting records  Planning for and completing an accounting report SOLICITORS ACCOUNTS SGS 2 Notes:  If possible use client money if paying VAT as agent.  Familiarise with the rules and SRA guidance because may be examined on this and not necessarily all in the workbook. SOLICITORS ACCOUNTS Key Terminology BANK ACCOUNT LEDGER Ledger or record kept by a firm showing the receipts and payments of money into and out of the firm’s own bank account. OFFICE CASH Ledger that contains entries relating to the firm’s office bank account. CLIENT CASH LEDGER Ledger containing entries relating to the firm bank account holding only client money. CLIENT LEDGERS Firm has to maintain two ledgers to record the transactions for each client: office ledger and client ledger:  Balance on any particular client’s office ledger shows how much money the client owes the firm: so effectively a list of all the money that the relevant client owes the firm.  Balance on any particular client ledger shows how much money the firm holds for the client in the (firm’s own) client account: so effectively a list of all the money held by the firm on behalf of a particular client [i.e. the money the firm owes the client] OFFICE ACCOUNT Used to describe the bank account which holds the firm’s own money. CLIENT ACCOUNT(S) Used to describe the bank account which is/are used to hold the clients’