Solicitor's Accounts

Question 1

How do you know if the money you hold is client money

Answer 1

Relates to regulated services delivered by you to a client

Held on behalf of third party in relation to regulated services delivered by you

As holder of office I.e trustee or PA

Question 2

Requirements if you want to use client money you hold to pay yourself

Answer 2

Give written notice of all costs to client Before you transfer any money. Must be for specific amount

Question 3

Reasons to withdraw client money from client account

Answer 3

For purposes it is held
Instructions of client
SRA instructions prescribed reasons
ONLY IF SUFFICIENT FUNDS

Question 4

When can client money not be kept separately

Answer 4

If money is in respect of fees or disbursements prior to delivery of bill and you don’t for any other reason maintain a client account then you don’t need to hold this in a client account if you advise client in advance of where and how money will be held

Question 5

Does client get interest for money in client account

Answer 5

Yes unless informed consent otherwise. Must be a fair sum

Question 6

How often are bank statements to be obtained and what do you do with them

Answer 6

Every 5 weeks at least

Compare to client ledger and cash book

Signed off by COFA or form manager

Question 7

Where do solicitor account rules not apply

Answer 7

If you hold or receive money jointly with a client or third party

If you operate a client account as a signatory

Only 5 weekly statement (compare with cash book and client ledger) and maintain central record of all bills apply

Question 8

How many cash accounts should be kept and what for

Answer 8

2 cash accounts

One for client bank account and one for office account

Question 9

How many ledge accounts should be kept and what for

Answer 9

2 ledge accounts

One for dealings with office money on behalf of client and one for dealing with client money for that client

Question 10

How long should accounting records be stored for

Answer 10

At least 6 years

Question 11

What happens if the SRA requires a report on accounts

Answer 11

This can be requested at reasonable notice by an accountant who is a member of accountancy body or works for a registered auditor

SRA can specify matters which accountant if engaged on and can refuse an accountant where they have committed misconduct or lacked skill and care

Must provide accountant with all required info

Question 12

If you have held of received client money, operated a joint account or clients own account as a signatory you must…..

Answer 12

Obtain an accountants report for that accounting period within 6 months of the end of the period and send it to SRA within the 6 months.

You don’t need to do this if all money was from LAA, or in that period the statement or passbook doesn’t exceed an average of £10,000 or max of £25,000

Question 13

Is money for disbursements client money

Answer 13

Yes

Question 14

Where should the interest on client money be recorded

Answer 14

On a client ledger account

Question 15

Can a client ask you not to deposit money until a specific date

Answer 15

Yes but you need this in writing

Question 16

What to do if a cheque is pre-dated

Answer 16

No entries are required at point of receipt as cheque is not money until date of payment

Record dealings with client money even if not paying in cheque until client later gives permission

Question 17

When to record dealings with client money

Answer 17

Dealings with client money must be recorded immediately

Question 18

Do you need to record receipt of a cheque not made out to the firm

Answer 18

No need to record this

Question 19

When can you transfer client money from client account which has insufficient funds

Answer 19

Only where there is sufficient money held for client in a separate designated bank account and funds to cover the payment are transferred from there to the general client bank account immediately

Question 20

What to do with a cash book

Answer 20

Use it to keep a running total of all transactions through client accounts held or operated by you

Question 21

What must be centrally recorded

Answer 21

Keep a central record readily accessible of all bills or other written notification of costs given by you

Question 22

Does client money need to be available on demand

Answer 22

Yes unless agreed with client or third party in writing

Question 23

When must client funds be returned

Answer 23

Promptly when no longer any proper reason to hold funds

Question 24

Requirements for client bank account

Answer 24

Client account must be a bank or building society in England or Wales. Name must include name of firm and word ‘client’

Question 25

Is money held only for a principal office or client money

Answer 25

Office money. (even when the partner is acting in their capacity as a client for the firm) Unless the firm is an LLP then it would be client money

Question 26

Where should money held only for a principal be kept (when the firm is not an LLP)

Answer 26

In an office bank account or a separate office bank account opened for that partner but not the client account. Can be kept in client account if firm is an LLP

Question 27

Do you have to record the handling of money held only for a principal

Answer 27

No but it would be prudent

Question 28

Is money held jointly for a principal and another person client money or office money?

Answer 28

Client money, even if the firm is not an LLP

Question 29

When the firm holds money as a stakeholder who’s money is this?

Answer 29

It belongs jointly to the two clients

Question 30

Should a transaction made on behalf of a client still be recorded even if it was made out of the office account?

Answer 30

Yes, transactions made on behalf of clients even if made out of the office account should be recorded in the firm accounts and on the client ledger

Question 31

What should be recorded on a client ledger (identified by client name and description of matter)

Answer 31

all receipts and payments which are client money on the client side of the client ledger account
AND
all receipts and payments which are not client money and bills of costs including transactions through the authorized body’s accounts on the business side of the client ledger account

Question 32

Should should a cash book show

Answer 32

A running total of all transactions through client accounts held or operated by the firm

Question 33

Is money received for professional charges (+VAT) office or client money?

Answer 33

Yes

Question 34

Is money received for court fees office or client money?

Answer 34

Yes

Question 35

Is money received for counsel fees office or client money?

Answer 35

Client Money

Question 36

What to do if you have a mixed receipt and your bank doesn’t allow you to split cheques

Answer 36

Pay all money into the office account and transfer client money (or use it to pay appropriate bill) within two working days
OR
pay all the money into the client account and pay out the office element within 14 days.

Question 37

Where should stakeholder money be paid into?

Answer 37

Stakeholder money must be paid into the client account and credited to a stakeholder ledger in the name of the two clients

Question 38

Is petty cash client or office money?

Answer 38

Petty cash is office money but then transfer the amount from the client account to the office account to repay the office

Question 39

What to do if the client account does not have enough funds to pay a bill

Answer 39

money can be transferred from the office account to the client account and then the bill can be paid out of the client account

Question 40

What to do with the money when a client pays a bill for solicitor fees

Answer 40

The money is office money and can be paid straight into the office account.
OR
it can be paid into the client account and transferred to the office account within 14 days

Question 41

What to do with a cheque made out to a client and where to record it

Answer 41

A cheque made out to a client goes straight to the client and not via the office or client accounts but should still be recorded in the accounts/ledger

Question 42

How to record interest earned by a client

Answer 42

Where a client earns interest you must record it on a ledger account in the client’s name