Solicitors Accounts - Client and Business Money and Accounts Ledgers

Question 1

Solicitors’ Accounts Rules

Answer 1

• Apply to authorised bodies, managers and employees
• Authorised body: body authorised by SRA to practice as a licensed body, recognised body or sole practioner

Question 2

Client Money

Answer 2

Money held or received relating to:

• Regulated services delivered by a solicitor to a clientor on behalf of third party in relation to regulated services delivered by you;
• As a trustee or by appointment;
• In respect of fees and unpaid disbursements

Question 3

Client

Answer 3

Current, former or prospective client

Question 4

Regulated Services

Answer 4

Legal and other professional services that are regulated by SRA

Question 5

Client Bank Account

Answer 5

• Opened at a bank or building society
• Firm’s name and “client” in title (this gives bank notice that these are not the firm’s funds)
• Account must be used for legal services only

Question 6

Client Account Ledger

Answer 6

• Record by client name
• Receipts of payment of client money and not client money

Question 7

Double Entry Bookkeeping

Answer 7

• Law firms operate two sets of accounts: client money and normal business accounts
• Both sets of accounts use double entry bookkeeping format
• Two entries for each transaction: debit (DR) and credit (CR)
• Cash Account/Cash Sheet: relates to the transactions taking place within a particular bank account
• Business acount: firm’s money
• Client account: money belonging to a client

Question 8

Receipt

Answer 8

• Debit cash account
• Credit client ledger

Question 9

Payment

Answer 9

• Credit cash account
• Debit client ledger

Question 10

Periodic Statements and Reconciliation

Answer 10

• At least every five weeks statements should be obtained and a reconciliation should be completed of the statement balance with the cash book balance and client ledger total
• Record of reconciliation must be signed off by the COFA or a manager of the firm

Question 11

Accounting Records

Answer 11

• If a during an accounting period a solicitor operates a joint account or a client’s own account as signatory
• Accountant’s report must be received for that accounting period within 6 months of the end of the period
• Report must be delivered to the SRA within six months of the end of the accounting period if the report shows a failure to comply with the SRA’s rules such that money belonging to clients or third parties is, has been or is likely to be placed at risk
• Exceptions: if all client money is received from LAA or total balance of all client accounts does not exceed an average of £10,000 and a maximum of £250,000
• Report must be prepared and signed by a chartered accountant who is or works for a registered auditor