Double-Entry Bookkeeping

Question 1

Rule 8.1 sets out the rules in relation to bookkeeping. What are those rules?

Answer 1

Firms must keep and maintain accurate, contemporaneous and chronological records to show dealings with client money

Question 2

Where will entries for transactions involving client money be recorded?

Answer 2

• Cash sheet client account (client account cash book)
• client ledger client account

Question 3

Where will entries be recorded for transactions involving non-client money?

Answer 3

• cash sheet business account (business account cash book)
• client ledger business account

Question 4

What happens if a client has more than one matter running at the same time?

Answer 4

Different client ledgers will need to be maintained for each of the ledgers

Question 5

What does the SRA guidance say about keeping accurate client accounting records?

Answer 5

• accounts should be maintained on the double-entry principle
• current balance on client ledger should be readily ascertainable
• entries should be made in chronological order
• ledger accounts should include the name of client and contain description of matter/transaction
• business account entries in relation to each client should be kept up to date as well

Question 6

What does the double entry principle mean?

Answer 6

For every transaction, there will be two entries for the same amount in the accounts.

One should be a credit and one should be a debit

Question 7

What will the balance on the client ledger show?

Answer 7

Will show how much money in the client account belongs to that individual client

Question 8

What will the balance on the client cash book records show?

Answer 8

How much money the firm holds in the client accounts for all clients (balance should equal total of all client ledgers)

Question 9

What will balance on the business side of the client ledger show?

Answer 9

How much money a client owes the firm

Question 10

How often must firms obtain bank account statements?

Answer 10

At least every 5 weeks

Question 11

How often must firms complete reconciliations?

Answer 11

At least every 5 weeks

Question 12

What is the purpose of the reconciliations?

Answer 12

Make sure the money held on accounts matches the balances of the cash book and the client ledger total

Question 13

What pair of entries is required for client money received by a client?

Answer 13

• credit the client ledger client account
• debit the cash sheet client account

Question 14

What pair of entries is required for client money being paid out?

Answer 14

• debit the client ledger client account
• credit the cash sheet client account

Question 15

What pair of entries is required for non-client money received?

Answer 15

• credit the client ledger business account
• debit the cash sheet business account

Question 16

What pair of entries is required for non-client money being paid out?

Answer 16

• debit the client ledger business account
• credit the cash sheet business account

Question 17

What pair of entries is required for money paid out from petty cash?

Answer 17

• debit the client ledger business account
• credit the cash sheet petty cash

Question 18

What entries are required for a transfer from client account to business account?

Answer 18

Step One

• debit the client ledger client account
• credit cash sheet client account

Step two

• credit the client ledger business account
• debit the cash sheet business account

Question 19

What entries are required for a transfer from business account to client account?

Answer 19

Step one

• debit the client ledger business account
• credit the cash sheet business account

Step two

• credit the client ledger client account
• debit the cash sheet client account

Question 20

What entries are required for splitting a payment that involves a mix of client and non-client money?

Answer 20

Step one

• credit client ledger client account
• debit the cash sheet client account

Step two

• credit client ledger business account
• debit cash sheet business account

Question 21

What entries are required for a transfer between to clients?

Answer 21

• debit client ledger client account for client transferring money
• credit client ledger client account for client who is receiving the money