SQE1 FLK2 Solicitors' Accounts about:srcdoc
SQE1 FLK2 Solicitors' Accounts
Any money belonging to the client which a
Client Money solicitor/firm has control over.
Should be kept in a separate client account
money held/received by a law firm
1. for regulated services delivered by you
to a client
2. on behalf of a third party in relation to
regulated services (held as agent or
stakeholder)
What falls under Rule 2.1 as client money?
3. as a trustee or holder of an office
(donee of power of attorney or trustee
of an occupational pension scheme)
4. in respect of your fees and any unpaid
disbursements if held or received prior
to delivery of a bill
1. unpaid disbursements (search fees, LR
fees) expected to be paid in connection
with a transaction
2. ‘on account of costs’ not yet paid
Examples of client money 3. deposit money received and held as an
agent or stakeholder on a property
sale
4. money received in respect of firm’s fees
before a bill is sent for those fees
Is money held or received in relation to a paid No - as it has already been paid. The money is
disbursement client money? business money, belonging to the firm.
Money belonging to the law firm rather than to
Business Money / Non-client money
its clients
Used by a law firm to receive, or make payments
Business bank acount
of, business money
Client Account • used by law firm to receive, or make
payments of client money
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,SQE1 FLK2 Solicitors' Accounts about:srcdoc
• account in England and Wales that has
firm’s name and client in its name
• belongs to the firm, not the client but is
where client money is held
1. must be held at either a bank/building
society in England/Wales
Requirements for a client account
2. must be labelled with name of firm and
‘client’ - Simmons client account
Includes both client and non-client (business)
Mixed Money / Payment
money
Firm charges for legal and other regulated
Fees / profits
professional services it provides
Costs or expenses paid or to be paid to a third
Disbursements party on behalf of the client.
Does not include office expenses (postage)
System used where for each transaction there is
Double-entry book-keeping a debit and credit entry in two different
ledgers which balance each other out
Record of financial transactions
Drawn up from the perspective of the business
Ledgers
1. DR = good for business
2. CR = bad for business
If they only deal with transactions using business
money. 3 columns:
1. business bank account
When would a ledger only have business
2. debts owed to firm (outstanding bills by
columns?
clients)
3. liabilities owed by firm (loans to be paid
etc)
1. asset ledgers (premises, fixtures,
vehicles, software)
2. expense ledgers (wages, utility bills, fuel
Examples of ledgers with only business columns costs, maintenance etc)
3. profit costs ledger (legal work done by
firm’s fee earners which clients have
been billed)
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,SQE1 FLK2 Solicitors' Accounts about:srcdoc
Ledger records payments into and out of firm’s
Cash sheet bank account
Have one for business and client account
DR = left (we drive on the left)
Balance columns (what side is DR and CR on?)
CR = right (you’d crash on the right)
DEAD CLIC mnemonic
DEBIT (increases) CREDIT (increases)
Expense (statement of Liability (statement
profit/loss) of financial
position)
How to decide whether an entry is a debit or
Asset (statement of Income (statement
credit?
financial position) of profit/loss)
Drawings/dividends Capital (statement
(statement of financial of financial
position) position)
Decrease in EAD = credit
Decrease in LIC = debit
1. identify the 2 ledgers where accounting
entries will be made
2. is it business or client money?
3. which ledger has DR and CR entry -
Summary of steps to record a transaction
what you do to one, do the opposite to
the other
4. check a debit and credit entry for equal
amounts is made
Description/summary of accounting entries
Journal entries
made in a firm’s ledger
Legal and other professional services regulated
Regulated services by SRA (acting as a trustee or as the holder of a
specified appointment)
On behalf of seller only - deposit belongs to the
Money held as an agent
seller from exchange rather than on completion
Money held as a stakeholder On behalf of buyer and seller during the period
between exchange and completion.
On completion, the deposit will belong to the
3 of 54 01/09/2025, 09:59
,SQE1 FLK2 Solicitors' Accounts about:srcdoc
seller
Where a third party sends money to the solicitor
to be held on their behalf until they confirm it
Money held to the sender’s order
can be released to the client, or they request the
solicitor returns it
• Must ensure client money is paid
promptly into a client account (directly
or shortly afterwards)
Requirement to pay client money into client ◦ if by cheque - next working day
account promptly is reasonable
• Client is not to be used for day-to-day
banking. Must use own bank account for
business
1. transfer money from firm’s business
account into client account temporarily
until money can be paid into client
What can be done to rectify where client money
account
is not paid promptly into client account?
2. once paid into client account, transfer
corresponding money back to business
account
1. if held by a solicitor as a trustee or
specific office appointment - may need
to comply with other role-specific
requirements which might conflict with
general principle
2. money from Legal Aid for costs (will be
When can a firm withhold client money from
only client money handled whilst acting
promptly entering a client account?
for that client) so can go into business
account immediately (even before bill is
delivered)
3. alternative arrangements agreed on in
writing (could hold in a third-party
managed account)
Must safeguard money and assets entrusted to
Requirement to keep client money safe
you by clients and others
Whose responsibility does the SRA Risk Outlook
Every solicitor’s
say it is to keep client money safe?
According to the SRA Risk Outlook, what can Lead to proceedings before the Solicitors
client money breaches lead to for solicitors? Disciplinary Tribunal, with results that can
4 of 54
01/09/2025, 09:59
SQE1 FLK2 Solicitors' Accounts
Any money belonging to the client which a
Client Money solicitor/firm has control over.
Should be kept in a separate client account
money held/received by a law firm
1. for regulated services delivered by you
to a client
2. on behalf of a third party in relation to
regulated services (held as agent or
stakeholder)
What falls under Rule 2.1 as client money?
3. as a trustee or holder of an office
(donee of power of attorney or trustee
of an occupational pension scheme)
4. in respect of your fees and any unpaid
disbursements if held or received prior
to delivery of a bill
1. unpaid disbursements (search fees, LR
fees) expected to be paid in connection
with a transaction
2. ‘on account of costs’ not yet paid
Examples of client money 3. deposit money received and held as an
agent or stakeholder on a property
sale
4. money received in respect of firm’s fees
before a bill is sent for those fees
Is money held or received in relation to a paid No - as it has already been paid. The money is
disbursement client money? business money, belonging to the firm.
Money belonging to the law firm rather than to
Business Money / Non-client money
its clients
Used by a law firm to receive, or make payments
Business bank acount
of, business money
Client Account • used by law firm to receive, or make
payments of client money
1 of 54 01/09/2025, 09:59
,SQE1 FLK2 Solicitors' Accounts about:srcdoc
• account in England and Wales that has
firm’s name and client in its name
• belongs to the firm, not the client but is
where client money is held
1. must be held at either a bank/building
society in England/Wales
Requirements for a client account
2. must be labelled with name of firm and
‘client’ - Simmons client account
Includes both client and non-client (business)
Mixed Money / Payment
money
Firm charges for legal and other regulated
Fees / profits
professional services it provides
Costs or expenses paid or to be paid to a third
Disbursements party on behalf of the client.
Does not include office expenses (postage)
System used where for each transaction there is
Double-entry book-keeping a debit and credit entry in two different
ledgers which balance each other out
Record of financial transactions
Drawn up from the perspective of the business
Ledgers
1. DR = good for business
2. CR = bad for business
If they only deal with transactions using business
money. 3 columns:
1. business bank account
When would a ledger only have business
2. debts owed to firm (outstanding bills by
columns?
clients)
3. liabilities owed by firm (loans to be paid
etc)
1. asset ledgers (premises, fixtures,
vehicles, software)
2. expense ledgers (wages, utility bills, fuel
Examples of ledgers with only business columns costs, maintenance etc)
3. profit costs ledger (legal work done by
firm’s fee earners which clients have
been billed)
2 of 54 01/09/2025, 09:59
,SQE1 FLK2 Solicitors' Accounts about:srcdoc
Ledger records payments into and out of firm’s
Cash sheet bank account
Have one for business and client account
DR = left (we drive on the left)
Balance columns (what side is DR and CR on?)
CR = right (you’d crash on the right)
DEAD CLIC mnemonic
DEBIT (increases) CREDIT (increases)
Expense (statement of Liability (statement
profit/loss) of financial
position)
How to decide whether an entry is a debit or
Asset (statement of Income (statement
credit?
financial position) of profit/loss)
Drawings/dividends Capital (statement
(statement of financial of financial
position) position)
Decrease in EAD = credit
Decrease in LIC = debit
1. identify the 2 ledgers where accounting
entries will be made
2. is it business or client money?
3. which ledger has DR and CR entry -
Summary of steps to record a transaction
what you do to one, do the opposite to
the other
4. check a debit and credit entry for equal
amounts is made
Description/summary of accounting entries
Journal entries
made in a firm’s ledger
Legal and other professional services regulated
Regulated services by SRA (acting as a trustee or as the holder of a
specified appointment)
On behalf of seller only - deposit belongs to the
Money held as an agent
seller from exchange rather than on completion
Money held as a stakeholder On behalf of buyer and seller during the period
between exchange and completion.
On completion, the deposit will belong to the
3 of 54 01/09/2025, 09:59
,SQE1 FLK2 Solicitors' Accounts about:srcdoc
seller
Where a third party sends money to the solicitor
to be held on their behalf until they confirm it
Money held to the sender’s order
can be released to the client, or they request the
solicitor returns it
• Must ensure client money is paid
promptly into a client account (directly
or shortly afterwards)
Requirement to pay client money into client ◦ if by cheque - next working day
account promptly is reasonable
• Client is not to be used for day-to-day
banking. Must use own bank account for
business
1. transfer money from firm’s business
account into client account temporarily
until money can be paid into client
What can be done to rectify where client money
account
is not paid promptly into client account?
2. once paid into client account, transfer
corresponding money back to business
account
1. if held by a solicitor as a trustee or
specific office appointment - may need
to comply with other role-specific
requirements which might conflict with
general principle
2. money from Legal Aid for costs (will be
When can a firm withhold client money from
only client money handled whilst acting
promptly entering a client account?
for that client) so can go into business
account immediately (even before bill is
delivered)
3. alternative arrangements agreed on in
writing (could hold in a third-party
managed account)
Must safeguard money and assets entrusted to
Requirement to keep client money safe
you by clients and others
Whose responsibility does the SRA Risk Outlook
Every solicitor’s
say it is to keep client money safe?
According to the SRA Risk Outlook, what can Lead to proceedings before the Solicitors
client money breaches lead to for solicitors? Disciplinary Tribunal, with results that can
4 of 54
01/09/2025, 09:59
