Solicitors Accounts Flashcards
SA: Client gives money in anticipation of the solicitor’s bill, which they haven’t received yet. Client money or business money?
Client money until bill is delivered to the client
SA: Client gives money in anticipation of disbursements that the solicitor will pay (like a bill for an expert witness). Client money or business money?
Client money if the solicitor hasn’t paid and the client hasn’t been billed for it yet
SA: What are the periodic statements and reconciliation required to maintain client accounts?
At least every five weeks:
- Statements should be obtained from the banks where client money is held or operated
-a reconciliation should be completed, a record of which must be signed off by the Compliance Officer for Finance and Admin or a manager of the firm. Any differences should be promptly investigated and resolved.
SA: Do I need to get an accountant’s report if I hold client money or if I just operate a joint account with the client?
Yes, within 6 months of the end of the accounting period.
And if the money has been placed at risk at all according to the accountant’s report, then the SRA needs to receive a copy of that report within the same 6 months.
SA: What is the exception to the rule that all accounts need an accountant’s report?
If all client money is from the Legal Aid Agency
or
The total balance of all accounts does not exceed an average of 10,000 and a max of 250,000.
SA: How long must accounting records be kept
For at least 6 years
SA: When firm issues bill to client, what entries are made?
Debit client account, business ledger
Credit Profit Costs and HRMC VAT
SA: When firm receives payment from client for its bills, what entries are made?
Credit client ledger account, business side
Debit client cash account, business side
No need to update profit costs or HMRC ledger
SA: Firm has billed the client and the client has sufficient funds in its account to pay the bill, can firm simply transfer the money from the client to the firm?
Yes, but must be shown as a two-stage process and firm must explain to the client how and when payments are being made and that reimbursement would be taken from the client account.
Debit client ledger account, client side
Credit client cash account, client side
Credit client ledger account, business side
Debit client cash account, business side
No need to update profit costs or HMRC ledger
SA: What if client asks for a discount on the bill, what are the entries?
Credit client ledger account, business side
Debit profit costs and HMRC ledgers
SA: Exceptions to general rule that all client funds must be placed into client account promptly
- solicitor holds the money as a trustee or as the holder of a specified office or appointment and paying the money into the client account would conflict with their obligations relating to that office or appointment;
- client money is from the Legal Aid Agency for the firm’s costs; or
- an alternative arrangement has been agreed IN WRITING with the client or third party for whom the money is held
SA: What must a firm do if they receive a check with both client and business money?
They MAY do any of the following:
1. split the check; or
2. deposit in either client or business account and transfer
SA: Client A wants $3000 of their money transferred to their grandson, Client B. Do you need Client B’s permission and what entries are required?
Yes, you need Client B’s permission.
Debit Client A’s client ledger account
Credit Client B’s client ledger account
No cash account changes required.
SA: Does a firm need to add VAT to disbursements?
No
SA: What’s a disbursement?
To treat an item as a disbursement, some of the following conditions must be met:
1. the firm paid the supplier on the client’s behalf and acted as the client’s agent;
2. the client received, used, or had the benefit of the goods or services paid for on their behalf;
3. the client was responsible for paying the third party for the goods or services;
4. the client authorized the firm to make a payment on its behalf;
5. the client is aware that the goods or services were from another supplier, not the firm.
