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Summary SQE 1 - Solicitors Accounts Revision Notes (FLK 2) $12.89   Add to cart

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Summary SQE 1 - Solicitors Accounts Revision Notes (FLK 2)

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Passed Jan 2024 SQE 1 first try (1st Quintile) using these notes. Summarises everything you need to know for the Solicitors Accounts aspect of the SQE 1 exam, including details of double-entry book-keeping and specific entries relating to different situations. Carefully curated summary notes, alig...

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  • January 4, 2024
  • 5
  • 2023/2024
  • Summary

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Solicitors Accounts
Table of Contents
Client money:...........................................................................................................................................1
Client account:..........................................................................................................................................2
Interest:....................................................................................................................................................2
Breach of the SRA Accounts Rules:............................................................................................................3
Requirement to keep and maintain accurate records in client ledgers:......................................................3
Operation of joint account; operation of a client’s own account................................................................4
Third-party managed accounts.................................................................................................................5
Obtaining and delivery of accountants’ reports; storage and retention of accounting records...................5


Client money:
Definition
Money held or received by you:
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
d. in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for
the same

Requirement to pay client money into a Client Account
- Client money must be kept separate from money belonging to the firm
- Client money received by a firm is paid into a client bank account unless the client money is held under
Rule 2.2 and there is no client account
- Client account is in the name of the firm and must also contain the word ‘client’ in its name
- Client money must be paid promptly into the client bank account
- If money is received that is not client money, it will be paid into the firm’s business account
- If money is received which comprises both client money and non-client money, the funds must be
allocated promptly to the correct client or business account

Circumstances in which Client Money may be Withheld from a Client Account
Repayment
- There are 3 exceptions to client money being paid promptly into a client account:
1. Money held as a trustee or as the holder of a specified office or appointment does not have to
be paid into a client account if doing so would conflict with your obligations under rules or
regulations relating to your specified office or appointment
2. If the client money represent payments from the Legal Aid Agency for your costs it does not
have to be paid into the client account
3. If you agree in the individual circumstances an alternative arrangement in writing with the client
or third party for whom the money is held not to hold the money in your client account

Accounting entries required
- Record in client ledgers identified by the client’s name and an appropriate description of the matter to
which they relate:

, 1. All receipts and payments which are client money on the client side of the client ledger account
2. All receipts and payments which are not client money and bills of costs including transactions
through the firm’s accounts on the business side of the client ledger account
- Maintain a list of all the balances shown by the client ledger accounts of the liabilities to clients an third
parties, with a running total of balances
- Cash book showing a running total of all transactions through client accounts held or operated by the
firm
- Client money is recorded in:
1. Cash sheet client account (records receipts into and payments out of client account)
2. Client ledger account for each individual client (records receipts into and payments out of client
money for that particular client)
- Non-client money is recorded in:
1. Business account (represents receipts into and payments out of the business account)
 Cash sheet business account shows this
2. Client ledger business account (records receipts in of non-client money, payments out of non-
client money, issuing bills of costs)
 Balance shows how much money that particular client owes the firm

Client account:
Meaning and name of account
- Client money must be kept separate from non-client money
- Client money is held in a separate bank account, called the Client Account

Obligation not to use Client Account to provide banking facilities
- You must not use a client account to provide banking facilities to clients or third parties
- Payments into, and transfers/withdrawals from a client account must be in respect of the delivery by
you of regulated services

Withdrawals and accounting entries required
- Any withdrawals from or transfers of money out of the client account must be made in respect of the
delivery of your legal services to the client
- Money can only be withdrawn from the client account for the purpose for which it is held, or following
instructions from the client, or on the SRA’s authorisation / in prescribed circumstances
- Withdrawals from the client account must be authorised and supervised and the money can only be
withdrawn if that particular client has sufficient funds in the client account
- A client’s money must be returned promptly to them as soon as there is no longer a proper reason to
hold the funds
- Entries for client money paid out/withdrawn from client account:
1. Debit client ledger client account for that client
2. Credit cash sheet client account

Interest:
Requirement to pay interest on client money
- You must account to clients or third parties for a fair sum of interest on any client money held by you on
their behalf
- You may by written agreement come to a different arrangement with the client or third party as to the
payment of interest, but you must provide sufficient information to enable them to give informed
consent
- The firm should arrange with its bank for all interest earned on the general client account to be paid
into the firm’s business account
1. A fair sum of interest should then be paid to each client

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