Solicitors' Accounts - Dealing with Mixed Receipts and Inter-Client Transfers Flashcards
Exception to paying in client money promptly
Solicitor holds the money as a trustee or as the holder of a specified office or appointment
Client money represents payments received from the LAA
Alternative arrangement agreed in writing
- E.g. client asking solicitor to cash cheque the following week when they get paid
Records of receipt of these funds must be kept on client ledger
Cheque made out to third party
Cannot be paid into firm’s bank account (either client of business)
Solicitor must forward cheque to third party and make no entries on ledger
Mixed Receipts
Client money + business money
Option 1 - Split the Cheque:
- Client money into client account (CR client ledger, client account record and DR cash account, client account record)
*and *
- Business money into business account (CR client ledger, business account and DR cash account, business account)
Option 2 - Deposit and Transfer: pay into client or business account and transfer promptly
- Credit the client ledger of either the client account/business account and debit the corresponding cash sheet
- When transfer takes place, debit the client ledger and credit the cash sheet of the account the money is being transferred from and credit the client ledger and debit the cash sheet of the account the money is being transferred into
Look out for options on exam which say that the firm MUST do something, they have options so the correct answer is MAY
Inter-Client Transfers
- Do not record DR or CR in cash account
- Debit client A, client account record
- Credit client B, client account record
Placing Business Money in Client Accounts
- To open the client bank account or maintain it at an agreed level
- Provide funds to make a payment on behalf of a client or trust
- Replace any sum incorrectly withdrawn
- Allow money in lieu of interest
- Under Rule 4
