SUMMARY SOLICITORS' ACCOUNTS MCQS PRACTICE EXAM TEST

You hold £500 on account of costs for the client. You pay a surveyor's fee of £200 + £40 for the client. The invoice is made out to you. Subsequently you send the clients a bill for £400 in professional charges. The client is registered for VAT. How do you send the VAT invoices? - CORRECT ANSWER-You will send the client one VAT invoice covering the VAT on both the survey and the profit costs. You are holding £600 on account of costs and have to pay a disbursement. Which is correct? (A) You cannot pay a disbursement from the client bank account unless you issue a bill. (B) You cannot pay the disbursement from the client bank account if it exceeds £600. (C) You are permitted to withdraw more than £600 provided you ask the client to prove additional funds promptly. (D) You can never pay a disbursement from the client bank account. - CORRECT ANSWER-B Which one of the following statements is correct? (A) A firm regulated by the SRA must account to a client for a fair sum of interest on any client money held. (B) It is a breach of the SRA Accounts Rules 2019 not to open a separate designated client account. (C) When paying interest, a firm must calculate the rate by reference to the best rate it is possible to get on the amount held. (D) Clients are always entitled to receive interest on client money. - CORRECT ANSWER-A: a firm regulated must account to a client for a fair sum of interest You pay a surveyors fee of £300+VAT on behalf of a client, registered for VAT, for whom you hold £500 on account of costs. If the invoice is registered to the firm which account does it need to be paid from? - CORRECT ANSWER-Must be paid from the business account Which one is correct? (A) A mixed receipt of client and business money can be paid into the business bank account provided the client money element is transferred promptly. (B) A mixed receipt of client and business money must be paid into the client bank account provided the client money element must be transferred promptly to the business bank account. (C) A receipt of money to reimburse a firm for a paid disbursement is a receipt of client money if no bill has been issued. (D) All firms regulated by the SRA must have a client bank account. - CORRECT ANSWER-A Which one of the following statements is wrong? (A) A mixed receipt can be paid into the business account. (B) Client money need not always be paid into the client bank account. (C) It is not necessary to send a client a bill before transferring money from the client account to the business account. (D) Any dealings with client money must be recorded under Rule 8. - CORRECT ANSWER-C Which one of the following is client money? (A) Money received in payment of a paid disbursement. (B) Money received for professional charges following the issue of a bill. (C) Money received for unpaid disbursements following the issue of a bill. (D) Money received generally on account of costs. - CORRECT ANSWER-D A firm holds £1,500 on account of costs. It gives the client the following bill. Professional charges £600 VAT £120 Paid disbursements £200 Unpaid disbursements £300 ------- Total £1,220 The firm wishes to transfer as much as possible to the business bank account. How much can the firm transfer? - CORRECT ANSWER-- £1,220 - Once a bill is issued, professional charges, paid and unpaid disbursements can be transferred to the business account. If a firm holds money on account of costs in the client bank account and pays a disbursement from its own business account, it can transfer money to reimburse itself without issuing a bill. - CORRECT ANSWER-False - Under Rule 4.2 mixed receipts can be paid initially into either bank account provided money is allocated 'promptly' to the correct account. Client money must always be paid into the client bank account. - CORRECT ANSWER- - False - Under rule 4.2 mixed receipts can be paid initially into either bank account provided money is allocated 'promptly' to the correct account. All firms regulated by the SRA must have a client bank account - CORRECT ANSWER- - False - A firm does not need a client bank account if the requirements of the rule 2.2 are met. (This is where the only client money received is for fees and unpaid disbursements prior to delivery of a bill).