Accounts Flashcards
(159 cards)
1
Q
What is double entry bookkeeping
A
Where every transaction has 2 aspects, both of which need to be recorded
2
Q
How are the two aspects in transactions recorded in a spread sheet?
A
One aspect appears in the left hand coloumn, and the other aspect on the right
3
Q
When are entries into the double entry book keeping method recorded?
A
As they occur
4
Q
True or false - the business account is regarded as seperate from owner or the proprietor
A
True
5
Q
What is liability to repay a business account referred as
A
capital
6
Q
What is debit notated as and what side of the sheet is it on
A
DR, left side
7
Q
What is credit notated as and what side of the sheet is it on
A
CR, right side
8
Q
If the DR entries exceed the CR entries, what is the balance described as
A
DR balance (and vice versa)
9
Q
When a bill is issued, what 2 aspects of the transactions are recorded
A
1- sale of solicitor services
2- gain of debt owed by client to firm
10
Q
What are professional charges services recorded as?
A
CR entries on income account
11
Q
What is client debt recorded as
A
DR on account in name of the client
12
Q
When charges paid for professional services are sorted, what happens?
A
Receipts are kept as loss of debt owed by c TO FIRM. No entry made on profit cash account when cash due - profit cost account merely records when bill is issues and not if paid
13
Q
What does cash account record
A
Records of receipts info and payments out of bank account
14
Q
What does petty cash record
A
Records periodic receipts of cash from bank and various payments via petty cash
15
Q
What are the main SRA account rules overseen by the SRA and who do they apply to
A
- Client money kept seperate from firms
- Client money returned promptly at end of matter
-Client money only used for intended purpose
-Proportionate reqs for firms to obtain annual accountants report
Only applies to authorised bodies, managers and employees. Jointly and severley liable.
16
Q
What is client money
A
Money held or received by firm relating to regulated services delivered to client, or on behalf of third party related to regulated services such as holding powers of attorney and in respect of any fees and unpaid disbursements.
17
Q
What are fees
A
Own charges or profit costs
18
Q
What are disbursements
A
Any costs or expenses paid or to be paid to a third party on behalf of client or trust (inc any VAT element) save for office expenses ie courier fees
19
Q
What does the definition of client money not include
A
Money received for disbursements which have been paid
20
Q
How can a firm avoid putting money for unbilled fees and disbursements into client acc
A
Sending a bill with anticipated future fees and disbursements with a view to paying into firms business account
21
Q
Who opens a client bank account and what is it used for ?
A
Opened by a firm but used for client money
22
Q
True or false - client money must be available on demand for the client unless an agreement has been signed otherwise in writing or with a 3rd party
A
true
23
Q
What is the rule with paying in client money
A
It must be paid promptly into client account
24
Q
What is the exception into paying client money into aclient account promptly
A
Where money is held as a trustee or holder/office and paying it in would conflict w specific arrangements
Payments received from L.A.A for firm costs
Firm agrees on an arrangement in writing w client or 3rd party w whom money is held
25
What is the further exception regarding paying client money promptly if the money received is for unpaid disbursements received prior to bill delivery and no client acc
Money can be held outside a client bank acc as long as the client is informed in advance of where and how money will be held
26
If a firm has no reason to hold funds, what happens to them
They are released promptly
27
What happens on receipt of mixed funds
Funds must be allocated to right account promptly
28
If money is sought in account of costs, and bill has not yet been issued, what is kept in the client bank
Bill of costs to paying party (before transferred to make payment)
Any payment for a specific sum must be identified in bill of costs covered by amount held
29
What happens if money is held in account of costs and the bill has been issued
It is promptly moved. If it hasnt been issued it stays where it is
30
What are some risks of keeping client money in business acc
If the retainer is terminated, transaction may fall through etc so hard to recoup funds
31
When can money be withdrawn from client bank acc
For purposes for which it is held
On behalf of 3rd party/client instruction
SRA prior authorisation
32
What should you do if the disbursement needing to be paid exceeds the money held in client?
Either dont pay it out or pay it from the business account (reimbursed when bill issued) or firm advances money to client to repay from client acc (useful if only missing a small bit)
33
What is a residual client account and what are the rules around withdrawal
Money the firm has not returned to client, usually as client has ghosted or died. If less than 500 then withdraw to donate, if over 500 then sra needs to authorise
34
Can you use a client account as a banking facility
No as money laundering issues
35
What do client bank accounts need to show
- all receipts and payments on behalf of client
- all payments made on behalf of client with firms own money
- bills issued to client
36
How is the client ledger account for each client identified
By name, matter description with all receipts shown
37
What is a seperate cash book needed to show for client accounts
All transactions through the client accounts
38
True or false - all client bank accounts and firm business accounts need bank statements or bank reconciliation statements every 4 weeks
FALSE - every 5
39
What needs to be sorted to generate a bank reconciliation statements
- cash book is up to date
- figures adjusted to reflect client money paid by firm may have left firm bank but not cashed in yet
40
What must any discrepancies revealed by reconicilation need to be?
Investigated asap
41
Why are 2 sets of records kept
So client money is seperate from the firms ordinary biz dealings
42
What do both sets of records need to be
Use the double entry book keeping system, legible, up to date, ledger accs kept with names and matter description, up to date business records in relation to each client
43
What does an inter ledger need to show
Contemporary and chronological records
44
What are dual cash accounts
2 seperate accounts to deal with different cash flows. One account for client and one for business. Usually moved onto same page for easy comparison
45
What is a dual ledger for client
A client ledger account with client money on behalf of client, and firms own money payments and receipt of bills
46
What is the first step to deal with receipts
identify if it is business or client and record
47
Wheres is a cash entry into account regsitered under and where is the corresponding one registered
DR, and CR is in ledger account of client from whom or on behalf of money received
48
Where do client money receipts get put
Into the relevant client bank account
49
Where do business money receipts get dealt with
The relevant client inbebtness to the firm is reduced
50
What happens if a payment is from a biz account
DR balance on biz column of client ledger sheets shows client owes firm money
51
What happens if a payment is made from client bank
Amount held for c is reduced (reduced CR)
52
What happens when a bill is issued
entries on account will show proof of charges and VAT. If there is no fund movement then theres no cash account entry
53
How is professional charges bills recorded in client ledger
DR entries for professional chargea and VAT in business section. Corresponding CR entries made on an income ledger account for professional charges and HMRC account.
54
What happens to professional charges and HMRC billed at end of year
Balance on profit costs account shows amount firm has billed for professional charges and HMRC ledger will show VAT paid to hMRC
55
True or false - no entries made on account re disbursements until the bill sent is recorded as/when paid
true
56
True or false - bill issued for professional charges and paid or unpaid dusbursements, money received in payment of bill will be firms own money and paid into the business
True
57
When will cash transfers occur
Where money is withdrawn from client bank account and paid into the business bank account to pay for firms professional charges
To advance money to a client or trust where solicitor needs to make payment on behalf of the client or trust and insufficient client money is available (once advanced, money becomes client money)
To replace withdrawn money
To allow a client a sum in lieu of interest
58
How is a transfer from client account to business account recorded
- Record payment of money from client account
- record receipt of monies into the business bank account
59
What are 4 key things to bare in mind when dealing with bills
- monies received as bill payment for professional charges/disbursements will be firms own money and paid into biz acc
- If firm is holding client money in client account and issues a bill for prof charges and paid/unpaid disbursements, the whole amount billed can be transferred into biz acc
-Where firm is holding client money in client acc, money due to firm for disbursements paid w firms own money can not be transferred unless a bill has issues or firm has made clear that when the money is received it will be used this way
- If a bill has not been issued, money received for a paid disbursement is firms own money, not client money and so is not in client acc
60
What is an inter client transfer
Where client A stops holding money for self and holds it for B ie if money is owed to B . No money is taken out but firms own records need to show this
61
How are inter client transfers shown
No entries are made on the cash account as no money is moving. A DR entry is made in client section of ledger acc of client for whom money it was originally, and a CR entry in client section of ledger for who the money is being held for
62
What is splitting a cheque
Where the firm pays different parts of the cheque into different bank accounts. IE firm pays £40 for a disbursement, client send £100 for costs and for the £40. This would be split-
DR Biz portion to cash account - business section
DR Client portion to Cash account - Client section
CR Business portion to client ledger account - business section
CR client portion to client ledger account - client section
63
What is a direct transfer
Where firms transfer money from a mixed receipt into one bank account and it is split after transfer. Should be paid into client and taken from there.
IE- DR whole amount to cash account and CR whole amount to client ledher account - listed in client section
When transferring business portion-
CR Cash Account and DR Client ledger account - client section
DR Cash account and CR Client ledger - biz section
64
What is a cash account
A record of receipts and payments in and out of bank. Petty cash usually holds a small amount of money for day to day
65
What is output tax
Output tax is the tax that a VAT registered business is required to charge on its taxable supplies (broadly, its sales) at the standard and reduced rates of VAT. It is payable to HMRC after the deduction of any recoverable input tax.
66
What is supply of goods
Where the whole property in goods is transferred including a gift of goods
67
What is supply of services
Everything that isnt a supply of goods but is done for consideration.
68
What is a taxable supply
Any supply of goods or services other than exempt supply.
69
Give examples of exempt tax supplies
supplies of land (apart from new commercial leases/leases of com prop where supplier has opted to be taxable)
Insurance
Finance
Health services
Burial
Cremation
Some postal services
70
What are the two main catergories of taxable supplies
Chargeable at a standard rate
Chargeable at a zero rate such as food supplies, water supplies, books
71
What services are subject to a reduced rate of tax
Mobiliity aids, domestic fuel, instillation of energy saving materials, renovation of certain dwellings, childrens car seats
72
What type of taxable supply will a legal firm charge
a standard rated supply
73
How is VAT chargeable in business
only on taxable supplies made in course of furtherance of business carried on by the taxable person
74
What is input tax
charged to the business by its suppliers
75
What does a business registered for VAT charge its customers
A business registered for VAT charges its customers output tax for which it must then account to HMRC.
76
What will the business deduct input tax charged to the business from
The amount accounted for to HMRC
77
Who is liable to HMRC for the amount of output tax charged
The person making the supply is liable
78
What's similar about zero rated and exempt supplies
No VAT is charged in either case by the supplier to his customer
79
What is different about zero rated and exempt supplies
Only a person who makes taxable supplies is able to recover input tax, i.e. the VAT charged to him by his suppliers.
80
Who is the taxable person
A person is a taxable person if they are or are required to be registered under VATA 1994.
Generally a person must register if the value of taxable supplies (not profit) in the preceding 12 months exceeded a figure specified in each year’s Budget (£85,000 for 2020/21)
81
When is an employee's services taxable
where a person, in the course of carrying on a trade, profession or vocation, accepts any office, any services supplied by them as holder of the office shall be treated as supplied in the course of a business carried on by them and are therefore chargeable with VAT.
82
What are the rules around exempt supply for input tax
If a person makes only exempt supplies they are not a taxable person (therefore no input tax recovery).
Exempt supplies made by a taxable person may fall within certain de minimis limits which can be ignored and input tax is recoverable.
If a taxable person makes taxable and exempt supplies, they are partially exempt (only a proportion of the input tax can be charged)
83
If a supply is fully taxable, what VAT is payable and on what?
If a supply is fully taxable, VAT at the standard rate is payable on the value of the supply. If the consideration is money, the value of the supply is equal to the consideration.
If a price/fee is agreed, it will be deemed to include VAT unless it states it is tax exclusive.
84
What are the rules around VAT for professional legal fees
When a fee is quoted it must be given plus VAT. If the VAT is not quoted the customer will only pay the quoted figure and the business will pay the rest.
85
What is the time of supply
The time of supply (tax point) decides the quarter at the end of which a taxable person becomes liable to account for output tax on a particular supply. Additionally, it determines the quarter in which a taxable person can claim input tax.
86
What are the 2 variations of tax point
1- if supplier issues a tax invoice w/in 14 days after basic tax point, date of invoice becomes tax point unless longer is agreed w HMRC (provided solicitors deliver bills w/in 3 months of services completion, the date of each bill is the tax point)
2- if the supplier issues a tax invoice or receives payment before basic tax point, the supply will (to extent covered by invoice/payment) be treated as taking place at date of invoice or payment
87
How long does a taxable person making a taxable supply to another taxable person have to provide an invoice?
30 days after time of supply (or longer if HMRC allows)
88
What needs to be included on a tax invoice
-An identification number
-The date of the supply i.e. Tax point
-The supplier’s name address and VAT registration number
-The name and address of the person to whom the supply is made
-The type of supply, e.g. sale, loan, hire
-The description of the goods or services supplied
-The quantity of goods or the extent of the services and the amount (excluding VAT) payable for each description
-The total amount payable (excluding VAT)
-The rate of cash discount
-The rate and amount of tax charged
89
What must a taxable person do within one month of the end of each quater account period
Submit a completed return form to HMRC
90
How is the amount of tax payable calculated
Total output tax charged less deductible input tax
91
What is needed in accounts regarding tax
a ledger account in the name of HMRC
Porfits costs account
ledger account in client name
92
True or false - disbursement are regarded by HRMC as supply of legal services and are VAT chargeable
FALSE
93
What are the conditions that must be satisifed for there to be a VATable disbursement
-You acted as the agent of your client when you paid the third party
-Your client actually received and used the goods or services provided by the third party
-Your client was responsible for paying the third party (e.g. estate duty and stamp duty)
-Your client authorised you to make the payment on their behalf
-Your client knew that the goods or services you paid for would be provided by a third party
-Your outlay will be separately itemised when you invoice your client, you will only recover the exact amount paid to the 3rd party
94
What does not qualify as disbursements
Those which are a normal and necessary part of the service supplied to the client
For example, telephone charges, postage and photocopying charges - these are sorted by an increase in professional charges
These are overheads of the business and HMRC requires the firm to charge VAT on them.
95
Are travelling expenses for a solicitor disbursements
No so are included in overall charge
96
If vatable items are mentioned seperately, what must the firm remember to do
To charge VAT on seperate elements
97
Where is VAT not charged in regards to searches
Local land charges, search fees, LR fees
98
Are LR fees VATable
No as they are a disbursement
99
Is SDLT a disbursement
Yes
100
What does HRMC accept as disbursements
Company search fees
Company registration fees
Court fees
Witness fees
Oath fees paid to another solicitor
101
What is the procedure when there is receipt of a cheque made out to the client or third party?
The cheque cannot be paid into a firm bank account. The firm is not the payee. The firm must forward the cheque to the payee asap
102
What is a dishounered cheque and what to do in that situation
A cheque that doesnt clear, where money taken from client bank accont exceeds what is held for the client.
any money improperly withdrawn from a client account must be immediately replaced. The firm will have to make good the shortfall by transferring its own money to the client bank account.
103
What are the rules around accepting commission in accounts
It is an additional income
The firm will have a commission received account (receipts are credited)
The firm will have a ledger account in the name of each company paying commission
HOWEVER - RARELY ENTITLED TO RETAIN IT and have to 'properly account to clients for any financial benefit received as a result'
104
How are comission fees 'properly accounted for'
Paying it to the client
Offsetting it against fees;
Keeping it only where the firm can justify keeping it, has told the client the amount of the benefit (or an approximation if the exact amount is not known) and the client has agreed to the firm keeping it.
105
Why do firms not want to retain commission fees
Retaining commission would take a firm outside the exemption allowing professional firms to avoid regulation by the Financial Reporting Council in relation to investment business.
106
How do firms deal with non payment of legal services ('bad debt")
The firm have to write off the amount owing for its professional charges and VAT and for any disbursements paid from the business bank account.
IE- CR Client ledger account in the business section
BR Bad debts account
After 6 months outstanding, VAT relief from HMRC
107
What is an abatement record and what does HMRC allow to happend regarding the output tax charged
Subsiding or decreasing. AKA if client moans bill is too high, the firm can reduce the price or subsidise the costs. HMRC allows output tax charged on bill to be reduced proportionally
108
What entries are made regarding an abatement record
Entries are made on the profit costs and HMRC account when the bill was issued are reversed.
The firm must also send the client a VAT credit note.
IE-
DR Profit costs account and DR HMRC account (with reduction)
CR Client ledger account (business section) with reduction in professional charges and VAT
109
Can firms debit abatements to a seperate abatements account
Yes
110
What happens to the abatements account balance at the end of the accounting period
The debit balance on the abatements account is transferred to the debit side of the profit costs account.
111
How is a withdrawal of petty cash recorded
CR Cash- business section
DR Petty cash account
112
Can a firm make a payment from petty cash on behalf of a client
Yes, butwill want to DR the client ledger account to show that the client now owes the firm for the expense incurred.
The DR entry must be made on the business section of the client ledger account even if client money is held for the client.
This is because petty cash is business money. The firm has elected to use business money on behalf of the client by deciding to use petty cash.
113
Can a law firm instruct another firm as an agent in a transaction such as criminal or civ litigation
Yes
114
How does the agent firm treat the instructing firm regarding accounts
The agent firm treats the instructing firm like any other client.
The firm will have a client ledger account in the name of the instructing firm and the normal entries will be made to deal with any client money and the delivery of the bill.
The professional fees charged by the agent are not a disbursement paid by the instructing firm on behalf of the client.
The professional fees of the agent are an expense of the instructing firm.
The firm will charge more for its legal services to cover the expense of using an agent.
Disbursements charged to client as usual
115
What comprises a total amount regarding agent fees and how are these recorded
The agent’s professional fees
VAT on those fees
any disbursements paid by the agent
The different elements are recorded separately in the instructing firm’s accounts.
Agent’s professional charges
CR cash account
DR Agency expenses account
=Business section
Agent’s VAT
CR cash account
DR HMRC account
= Business section
Agent’s disbursements
CR Cash account
DR Client’s ledger account
= Business section
116
How does an instructing firm charge its own client the agents fees
The instructing firm will send its own client a bill adding the agent’s professional charges to its own professional charges and passes on the agent’s disbursements to the client.
117
Why would it be wrong for firms to earn interest on money held in client banks without accounting for the benefit of clients?
The SRA's principles of not abusing your position/taking advantage and properly accounting for any benefit received as a result of client instructions made come into question here
118
What are the sra rules on charging interest
You must ‘account to clients or third parties for a fair sum of interest on any client money held by you on their behalf, unless you have reached a separate agreement with your client’.
Rule 7.1 of the SRA Rules
AND
You ‘may by a written agreement come to a different arrangement with the client or the third party for whom the money is held as to the payment of interest’ but you must provide the client or third party with ‘sufficient information to enable them to give informed consent’.
Rule 7.2 of the SRA Rules
119
What do sra rules not cover regarding interest
When interest is to be paid
How interest is calculated
Firms can set their own policy
120
What are some things that may be included in a firms interest policy
- A de minis e.g. interest will be accounted for unless it is less than a stated figure i.e. £20 or less.
-The figure will need to be set at a reasonable level
-The figure will need to be reviewed in light of current interest rates (n.b. these are increasing at present)
The policy should be highlighted to the client at the outset of the retainer.
121
What methods are there that firms can use to deal with interest
Firms can choose to pay client money either:
1) into a general client bank account, or
2) into a separate deposit bank account designated for money of that particular client.
122
Do the rules by the sra re interest change depending on the amount
The requirement under the Rules is the same, irrespective which method is adopted.
The interest allowed must be a ‘fair sum’.
123
When will a firm create a seperate designated bank account for that client
If the matter holds a substantial amount for a significant time and the firm simply want to pass all interest acquired to client
124
What does a firm have to decide re interest if the client money is in the general client bank account
By reference to the firms policy, whether to allow interest and how to calculate it. The sum decide on will be allowed from business bank account and is technically a business expense - some firms will cover the interest taken as a business expense by taking the intesrest from a general client account, paying it into business bank and then calculating and withdrawing the relevant interest for the client
125
Why is opening a seperate client account for every client a pain
As it would be administratively bothersome and tiresome to keep all different bank info. Also, keeping it to one client account and paying out interest proportionately means the firm may earn more interest then they need to pay out
126
What do firms need to ensure when opening a separate client account for a particular client
- The client's ledger account must show receipts and payments of client money dealt with through a designated deposit bank account made for them.
-The firm's cash account must include details of receipts and payments of client money dealt with via the separate designated deposit bank account. There can be a separate cash account for each dedicated deposit bank account or a combined cash account showing all transactions on the designated deposit bank account.
Disadvantage - no opportunity to earn money like they would with one client account
127
When cash is transferred to the seperate designated client account, what is it recorded as
DR, and notes need to be added to the ledger too
128
What are the 2 stages when transferring money from the general client bank account to a designated client bank account and how is this recorded
Payment out of general client -
CR Cash and DR Client ledger account (both in client section)
To record receipt into seperate account
CR designated Client ledger account (or an additional column on the original general client account)
DR deposit cash acc
If money is received and sent straight to designated client, than the payment out of general is not needed
129
What is interest earned on a separate designated deposit account recorded as and where
CR on clients new ledger
DR on deposit cash account
130
What is the process to follow if the bank will not allow a payment directly from designated deposit accounts
The total sum including interest is transferred to the general client bank account so it can be made from the general account
131
What is the disadvantage of just using one general client account for interest
Firm has to calculate how much would have been earned
132
True or false - interest allowed usually reduces fees the client has to pay
true - if the balance is cleared a cheque for interest may be sent
133
How is interest recorded on general client account entries
The business money related to interest will be recorded in the business cash account and in the business section of the client ledger account. If money is transferred from the business bank account to the client bank account and held for the client, entries have to be made on client ledger and cash account to record cash from business to client account
134
What does the Guidance to Acccountants guide say about holding money as a stakeholder (holding completion monies until can be released)?
Stakeholder money may be shown on sellers ledger but has to clearly be labelled as stakeholder money held for both buyer and seller.
Stakeholder money can just be shown on the sellers ledger account without setting up 2 seperate ones providing it is labelled clearly
135
How would stakeholder money held in the sellers ledger be labelled
DR cash account
CR sellers ledger account
Both in client section
136
How would stakeholder money in a joint account with both parties names be registered
DR Cash
CR Joint account
Both in client section
137
On completion, how are the completion monies transferred from a joint stakeholder ledger account to the sellers ledger
Inter client transfer-
DR Joint stakeholder ledger account
CR Sellers ledegr account
Both client section
138
How is a deposit when acting as an agent in property transactions credited to a sellers ledger
DR Cash
CR Seller's ledger account
Both on client section
139
What is a bridging loan
Where a seller does not have enough momey to pay a depsoit on a new property w/o compeltion funds, a loan can be taken from a bank to cover the exchange period.
140
When a bridging loan is in effect, what happens to the money recieved by the solicitors as a deposit
It is held to the order of the borrower as the loan is between the borrow and the bank. The monies are credited to the borrowers ledger account
141
What are the 2 methods a firm can use when dealing with mortgage funds when acting for both lender and borrower
1- the mortgage is advanced to the borrowers ledger account when received - the details column must include name of the lender and that the mortgage is an advance
2- The mortgage advance is credited to a separate ledger account in the name of the lender on receipt. On completion day, the funds are available to the borrower and so an intra-client transfer should be made to borrowers ledger
142
If another person is discharging the debt acquired by the lender for legal fees, the debt can be transferred to that person's ledger account. How is this usually shown?
General notations before transfer-
DR on buyers ledger account, business section with the fees charged on the purchase and VAT
CR profit costs account and HMRC account regarding fees and VAT
DR lenders ledger account, business section with fees charged on mortgage and VAT
CR profit costs account and hmrc account with fees and vat
To transfer the debt from the lenders ledger account to the borrowers ledger-
CR lenders ledger account, business section with fees charged on mortgage and VAT as one figure
DR buyers ledger account, business section with fees charged on purchase and VAT as one figure
If the firm has chosen not to have a seperate ledger account for the lender, the charges and VAT of the lender will have to be shwon on borrowrs ledger acc.
143
What is an alternative and quicker method of splitting proceeds when acting for seller and lender with a mortgage redemption
The credit entries can be split at time of receipt, with part credited to seller ledger and part client ledger, with all amount debited to cash account client section.
144
If acting for a seller and the lender with a sale involving a mortgage redemption , how would the sale proceeds be shown to be split?
Credit the whole amount to sellers ledger account and then do an inter client transfer of amount to redeem the mortgage
CR sellers ledger account and DR Cash account - client section
DR sellers ledger account and CR lenders ledger account - client section
Firm then pays the mortgage redemption to the lender-
DR Lender's ledger account and CR Cash account - client section
145
If a seller is paying for the lenders legal fees for a mortgage redemption, how is this shown (if acting for both parties)?
DR sellers ledger acc, business section with fees on sale and VAT
CR profit costs account and HMRC account with fees charged on sale and vat
DR lenders ledger account, business section with fees charged on mortgage and VAT
CR profit costs acc and HMRC acc with fees charged on mortgage and VAT
Transfer debt from lenders ledger account to sellers ledger-
CR Lenders ledger acc with fees charged on mortgage and VAT as one amount
DR sellers ledger account with fees charged on mortgage and VAT as one amount
146
When opening a joint account for the firm/solicitor and a client/3rd party, how is this described and what must be recorded
joint names of sol/firm and client. This account is NOT classed as a client account but it IS client money.
The account has to have statements taken from the bank every 5 weeks minimum
The bills and notifications of costs from this account has to be recorded
147
What rules apply if a solicitor is using the clients own personal bank account (maybe via power of attorney)
Statements taken min every 5 weeks
Reconciliations (figure checking) every 5 weeks min
Keeping a readily accessible central records of bills/cost notifications.
If cant keep up with the 5 week process, not in sra rules breach as long as reasonable steps have been taken to show money not at risk
148
What must be considered if a firm enters into an agreement with a client to use a third party account to manage client money rather than firms own client account
- Must be appropriate to use the third party in that matter
-firm must have an overview on how it operates
- Do the costs of the third party come with more benefits (usually yes as its more secure and reduction of firm over heads)
-Is the TPMA (Third party managed account) regulated by Financial Conduct authority? if so, is it an authorised payment institution, a small payment institution adopted voluntary safeguards or an EEA-authorised institution?
-It must be an acc held at a bank or BS by which the third party receives and pays money on the solicitors and clidnts behalf (escrow service)
149
What must a client understand when a TPMA is used
- the contractual terms of the TPMA, any of their fees and who pays them
- the clients right to terminate and dispute fees
- complaint procedure
150
What info does the firm have to give the SRA if it uses a TPMA
- name and SRA firm number
-TPMA name
-TPMA's FCA authorisation number
-TPMA commencement date
If same provider used for multiple clients, only inform SRA at first use
151
When must an accountant report be obtained
When a firm has received or held client money, or operated a joint acc or clients own acc
152
What is the purpose of the accountant report
To confirm compliance
153
When must the accountant report be delivered to the SRA
W/in 6 months of the end of the accounting period, and must be submitted by the firm or managers
154
What are some serious factors rhat the SRA would consider as a failure to comply with SRA rules
- Significant shortfall unless bank error or rectified promptly
- Systematic billing for fees and disbursements not been incurred
- Evidence of disregard for client money/assets
-Actual or suspected fraud or dishonesty
-Significantly defecient account records/records not available
-Failure to provide requested docs
- Client account reconciliations not carried out
-Client account used as a banking facility
155
When are accountant reports not required
-All of client money held/received during period is from Legal Aid Agency OR
- In the accounting period the total balance of all client accunts plus any joint accounts and clients own accounts doesnt exceed and avg of 10k and max of 250k (In pounds or the equivaent conversion in foreign money0
156
True or false - the sra will always require a final accountants report on firm closure
False - only on a case by case basis
157
When can an accountants report be disqualified
- accountant is not registered with a charted account body or does not work for a registered auditor
- the accountant has been found guilty by relevant body for misconduct or equivalent
- SRA is satisfied account hasnt excerise due care and skill in making the report
158
What does the firm have to provide the accountant preparing the accountant report with
- details of all accounts held at bank/BS/financial institution at any time during accounting period
- all other info and docs required to complete report
159
How long do accounting records need to be securely stored and retained for
at least 6 years
