BPP Solicitors Accounts Notes (Detailed Crib Sheet - 97% pass rate)
Underlying concepts:
- Rule 4.1: a firm must keep client money separate from money belonging to the firm
- Firms must have systems and controls in place to ensure compliance with the rules
- 4 types of client money (Rule 2.1): money held or received by the firm
1. RE regulated services delivered by the firm to the client
2. On behalf of a 3rd P RE regulated services delivered by the firm
3. As a trustee/holder of a specified office/appointment, e.g. a donee or power of
attorney
4. RE your fees/any unpaid disbursements if held/received prior to delivery of a bill
for the same
- Office money = money belonging to the firm
Disbursements Client money (if available). If not, office money
The offer ledger documents the client’s debts to the firm
The ‘cash’ section represents the bank’s point of view
Always complete the date, where you have put the corresponding entry, details, and the
balance
Action Entries Notes
General
Client money received i.e., CR Client Ledger money is paid into the client
receiving a cheque on account of DR Client Cash account
general costs/ receiving a (also includes being paid for
cheque (made payable to firm) unpaid disbursements)
Client money withdrawn (where DR Client Ledger money is paid out of client
there are sufficient funds in client CR Client Cash account i.e. You pay a
account) disbursement on Mr M’s behalf
out of client money (that Mr M
has previously sent you on
account of general costs).
Do not include future
disbursements i.e., not yet
paid
Invoice sent to client i.e., record DR Office Ledger money sent after bill for fees is
a bill of costs is issued/bill of CR Profit Costs delivered. You charge Mr M
costs for fees or i.e., you render profit costs of £X for the work
a bill you have done on behalf of Mr
M.
Client pays invoice i.e.; the firm CR Office Ledger money paid into office account
receives a cheque for bill of DR Office Cash i.e., Mr M sends £100 to repay
costs/in settlement of… agency fees (goes straight into
office). If client agrees to pay
costs then need to transfer
Settling invoice from Client 1a: DR Client Ledger Mr M instructs you to settle the
Account i.e., settle a bill of CR Client Cash bill by transferring money from
costs/transfer money to office the firm’s client account to
account 1b: CR Office Ledger firm’s office account
1
, DR Office Cash
Solicitor receives a mixed CR office ledger Split cheque upon cashing it in
cheque and splits the money DR office cash (or if bill of costs is already
immediately settled), by paying some into
CR client ledger the office account and some
DR client cash into client account.
If firm has paid client cheque but CR office cash any money withdrawn from a
you learn the cheque has not DR office ledger client account must
been accepted by the bank - i.e. immediately be paid back from
dishonoured cheque CR client ledger the office account into client
DR client cash account (Rule 6.1)
Paying money to client i.e., DR Client Ledger money out of client account
sending a cheque to the client CR Client Cash i.e., balance on the account is
paid to the client
Petty cash spent i.e., paying DR Office Ledger VAT free amount (then on
disbursement out of petty cash CR Petty Cash invoicing, charge VAT out of
by firm (taxi fare for client) the client office ledger
Petty cash returned CR Office Ledger office money
DR Office Cash
Firm pays money to a client DR Office Ledger paid out of office money
CR Office cash
Cheque made payable to the No entries – this must be passed on No CR/DR but make a note in
client i.e. the firm receives a to the client the client ledgers that the
cheque made payable to your cheque was received and
client forwarded to the client.
Exchange of Contracts
BS Exchange – deposit in CR client ledger: buyer client Step 1: buyer sends deposit
receipt of deposit from DR client cash money to solicitor i.e. cheque =
client/receipt of cheque client money
BS Exchange – pay out DR Client ledger: buyer client Step 2: payment of deposit to
CR Client Cash seller’s solicitor (it’s a normal
(also at completion) payment and ‘stakeholder’ is
irrelevant here)
SS Exchange – stakeholder i.e., CR Client Ledger: Stakeholder Step 1: holding deposit on trust
on receipt of deposit at DR Client Cash for the buyer + seller until it’s
exchange clear who to pay
When you complete a sale,
remember to record the receipt
of the balance of the sale
proceeds (the purchase price
less the deposit).
SS Completion – stakeholder DR Client Ledger: Stakeholder Step 2: Money already in the
*Remember to add this in exam CR Client Ledger: Seller Client account just need to change
after exchange as they won’t who it belongs to (a single
remind you re completion!!! double-entry). On completion,
the money becomes the
client’s money.
SS pay to client – stakeholder DR Client Ledger: Seller Client on payment of cheque to the
CR Client Cash client. You receive payment
2
Underlying concepts:
- Rule 4.1: a firm must keep client money separate from money belonging to the firm
- Firms must have systems and controls in place to ensure compliance with the rules
- 4 types of client money (Rule 2.1): money held or received by the firm
1. RE regulated services delivered by the firm to the client
2. On behalf of a 3rd P RE regulated services delivered by the firm
3. As a trustee/holder of a specified office/appointment, e.g. a donee or power of
attorney
4. RE your fees/any unpaid disbursements if held/received prior to delivery of a bill
for the same
- Office money = money belonging to the firm
Disbursements Client money (if available). If not, office money
The offer ledger documents the client’s debts to the firm
The ‘cash’ section represents the bank’s point of view
Always complete the date, where you have put the corresponding entry, details, and the
balance
Action Entries Notes
General
Client money received i.e., CR Client Ledger money is paid into the client
receiving a cheque on account of DR Client Cash account
general costs/ receiving a (also includes being paid for
cheque (made payable to firm) unpaid disbursements)
Client money withdrawn (where DR Client Ledger money is paid out of client
there are sufficient funds in client CR Client Cash account i.e. You pay a
account) disbursement on Mr M’s behalf
out of client money (that Mr M
has previously sent you on
account of general costs).
Do not include future
disbursements i.e., not yet
paid
Invoice sent to client i.e., record DR Office Ledger money sent after bill for fees is
a bill of costs is issued/bill of CR Profit Costs delivered. You charge Mr M
costs for fees or i.e., you render profit costs of £X for the work
a bill you have done on behalf of Mr
M.
Client pays invoice i.e.; the firm CR Office Ledger money paid into office account
receives a cheque for bill of DR Office Cash i.e., Mr M sends £100 to repay
costs/in settlement of… agency fees (goes straight into
office). If client agrees to pay
costs then need to transfer
Settling invoice from Client 1a: DR Client Ledger Mr M instructs you to settle the
Account i.e., settle a bill of CR Client Cash bill by transferring money from
costs/transfer money to office the firm’s client account to
account 1b: CR Office Ledger firm’s office account
1
, DR Office Cash
Solicitor receives a mixed CR office ledger Split cheque upon cashing it in
cheque and splits the money DR office cash (or if bill of costs is already
immediately settled), by paying some into
CR client ledger the office account and some
DR client cash into client account.
If firm has paid client cheque but CR office cash any money withdrawn from a
you learn the cheque has not DR office ledger client account must
been accepted by the bank - i.e. immediately be paid back from
dishonoured cheque CR client ledger the office account into client
DR client cash account (Rule 6.1)
Paying money to client i.e., DR Client Ledger money out of client account
sending a cheque to the client CR Client Cash i.e., balance on the account is
paid to the client
Petty cash spent i.e., paying DR Office Ledger VAT free amount (then on
disbursement out of petty cash CR Petty Cash invoicing, charge VAT out of
by firm (taxi fare for client) the client office ledger
Petty cash returned CR Office Ledger office money
DR Office Cash
Firm pays money to a client DR Office Ledger paid out of office money
CR Office cash
Cheque made payable to the No entries – this must be passed on No CR/DR but make a note in
client i.e. the firm receives a to the client the client ledgers that the
cheque made payable to your cheque was received and
client forwarded to the client.
Exchange of Contracts
BS Exchange – deposit in CR client ledger: buyer client Step 1: buyer sends deposit
receipt of deposit from DR client cash money to solicitor i.e. cheque =
client/receipt of cheque client money
BS Exchange – pay out DR Client ledger: buyer client Step 2: payment of deposit to
CR Client Cash seller’s solicitor (it’s a normal
(also at completion) payment and ‘stakeholder’ is
irrelevant here)
SS Exchange – stakeholder i.e., CR Client Ledger: Stakeholder Step 1: holding deposit on trust
on receipt of deposit at DR Client Cash for the buyer + seller until it’s
exchange clear who to pay
When you complete a sale,
remember to record the receipt
of the balance of the sale
proceeds (the purchase price
less the deposit).
SS Completion – stakeholder DR Client Ledger: Stakeholder Step 2: Money already in the
*Remember to add this in exam CR Client Ledger: Seller Client account just need to change
after exchange as they won’t who it belongs to (a single
remind you re completion!!! double-entry). On completion,
the money becomes the
client’s money.
SS pay to client – stakeholder DR Client Ledger: Seller Client on payment of cheque to the
CR Client Cash client. You receive payment
2
