Summary Solicitors Accounts - Cheatsheet + Detailed Notes all-in-one

Solicitor Accounts
Exam For each question, please write for each of the transactions listed in that question:
● the number of the transaction;
● full name of ledger(s)/account(s) in which you would record a debit entry and corresponding amount for
entry; and
● full name of ledger(s)/account(s) in which you would record a credit entry and corresponding amount for
entry.

Example:
Transaction 1a
DR Client ledger Mrs Smith 250
CR Client cash 250

1.5 marks for each DR/CR double entry. 0.5 for CR, 0.5 for DR, 0.5 for the amount (same for both CR/DR)

You may use either ‘Debit’ and ‘Credit’ or ‘DR’ and ‘CR’ to indicate which entry is which.
You do not need to add a '£' sign before any amounts you are recording.
You do not need to state any balances or to provide any details / descriptions / narrative.
Where more than one pair of entries required, label each pair as, e.g. Transaction 1a and Transaction 1b.

Always assume that at the point of Transaction 1, client account is 0. However, very likely that first few
transactions will involve DR Client Cash. It will be obvious if the client account is depleted (by one large trxn) at
some point, requiring you to disburse from office account instead.

If you do not have enough money in client account for disbursements, do not do partial disbursement from client
account + partial disbursement from office account. The entire disbursement will be made from the office
account.

In exam, will always state where VAT is chargeable for a particular expense; if no reference to VAT being
chargeable, can assume no VAT is payable.

General Summary of Transactions
Trxns Client Ledger Balance = CR
Office Ledger Balance = DR
VAT is If you receive cheque payable to client, should not be banked by firm, pass on to client.
20%
Disbursements regarding Client Account
Deposit (on account of costs)
- DR Client Cash: Cheque from Client (on account of costs)
- CR Client Ledger [Client Name]: Cheque from Client (on account of costs)

If cheque is dishonored (Reversal)
- CR Client Cash: Dishonored Cheque
- DR Client Ledger [Client Name]: Dishonored Cheque

Disbursements
- CR Client Cash (Land Registry Fee)
- DR Client Ledger: [Client Name]

Solicitor as agent/paying on behalf of client for ease
- DR Client Ledger [Client Name]: Client Cash (Pay for Groundsure/Highway search or Land
Registry Fees) (amount inclusive of VAT)
- CR Client Cash: Pay for Groundsure search etc. (amount inclusive of VAT)

, Subsequent Reimbursement of Sum owed to Firm (transfer from Client to Office account)
- CR Client Cash: Client Ledger [Client Name] (Transfer to Office)
- DR Client Ledger [Client Name]: Client Cash (Transfer to Office)
- DR Office Cash: Office Ledger (Transfer from Client)
- CR Office Ledger: Office Cash (Transfer from Client)

Disbursements regarding Office Account
Solicitor as Principal (“you arrange for…to do some work…”; “you incur incidental expenses in relation to
client’s matters”, “fee note addressed to your firm”) **Always done office side; especially for pre-contract
coal mining search and desktop environmental search
- DR Office Ledger: Office Cash (Pay for Desktop Environmental Search) (net amount) (*State:
VAT of amount to charge when bill rendered to client)
- CR Office Cash: Pay for Groundsure search (net amount)
- CR Office Cash: VAT amount
- DR VAT account: Office Ledger [Client Name] VAT amount

Solicitor as agent (“addressed to client”)/paying on behalf of client for ease
If enough money, do using client side. Same tax rules apply if paid using client account; See above.
- DR Office Ledger [Client Name]: Office Cash (Pay for Groundsure search) (amount inclusive of
VAT)
- CR Office Cash: Pay for Groundsure search (amount inclusive of VAT)

Issuing Bill of Costs
- DR Office Ledger [Client Name]: Profit Costs (Bill to Client) excluding VAT
- CR Profit Costs: Office Ledger: [Client Name] (Bill to Client) excluding VAT
- DR Office Ledger [Client Name]: VAT account (VAT on Profit Costs)
- CR VAT Account: Office Ledger [Client Name] VAT on Profit Costs
- (If relevant because of previous transactions) CR VAT Account: Office Ledger [Client Name]
VAT on previous taxable disbursements, e.g. accountant’s bill, search fees (*Note: usually only
ONE disbursement in exam. Look at the previous “VAT account”, then add it to the VAT on
Profit Costs amount)

If there is abatement in costs
- CR Office Ledger [Client Name]: Profit Costs (Abatement of Costs) excluding VAT
- DR Profit Costs: Abatement of costs excluding VAT
- CR Office Ledger [Client Name]: VAT account (VAT on abatement of costs)
- DR VAT account: VAT on abatement

Settlement of a Bill of Costs
- DR Office Cash
- CR Office Ledger [Client Name]

Transfer from Client to Office (for Settlement of a Bill of Costs)
- CR Client Cash: Client Ledger [Client Name] (Transfer to Office)
- DR Client Ledger [Client Name]: Client Cash (Transfer to Office)
- DR Office Cash: (Transfer from Client)
- CR Office Ledger [Client Name]: (Transfer from Client)

Petty Cash
- (If relevant/mentioned) CR Office Cash: Petty Cash (Withdrawal of Petty Cash)

, - (If relevant/mentioned) DR Petty Cash: Office Cash (Withdrawal of Petty Cash)
- DR Office Ledger - Client: Petty Cash (Taxi Fare)
- CR Petty Cash: Office Ledger - Client (Taxi Fare)

Payment of money from solicitor to client
- CR Client Cash: Client Ledger [Client Name] (Cheque to Client)
- DR Client Ledger [Client Name]: Client Cash (Cheque to Client)

Mixed Payments - Split Receipt
- DR Client Cash: Office Ledger [Client Name] (Cheque from client split: amount into office, and
amount into client)
- DR Office Cash: Office Ledger [Client Name] (Cheque from client split: amount into office,
amount into client)
- CR Client Ledger [Client Name]: Office Cash (Cheque from client split: amount into office, and
amount into client)
- CR Office Ledger [Client Name]: Office Cash (Cheque from client split: amount into office, and
amount into client)

Bad Debts
- CR Office Ledger [Client Name]: bad and doubtful debt (amount of unpaid debt excluding VAT
amount)
- DR bad and doubtful debts account: bad and doubtful debt (excluding VAT amount)
- CR Office Ledger [Client Name]: VAT account (VAT on bad debt)
- DR VAT account: Office Ledger [Client Name] (VAT on bad debt)


Property Property - Deposit on Exchange - Buyer
Trxn - Receipt from B:
Buyer - DR Client Cash: (Cheque for the deposit)
- CR Client Ledger: Buyer Client (Cheque for the deposit)

Payment to S’ Solicitors
- CR Client Cash: (Pay deposit to seller’s solicitors)
- DR Client Ledger: Buyer Client (Pay deposit to seller’s solicitors)

Mortgage - Borrower
No Separate Ledger for Lender
Receipt of mortgage funds from lender
- DR Client Cash (receipt of mortgage funds from [Lender])
- CR Client Ledger: borrower (receipt of mortgage funds from [Lender])

Receipt of outstanding completion monies from client (if client not borrowing full amount)
- DR Client Cash (from client re purchase)
- CR Client Ledger: borrower (from client re purchase)

Pay purchase price to solicitor
- CR Client Cash (pay purchase price to seller’s solicitors)
- DR Client Ledger: Client Cash (pay purchase price to seller’s solicitors)

Separate Ledger for Lender
Initial: Receipt of Mortgage Funds

, - CR Client Ledger: [lender client] (receipt of mortgage funds)
- DR Client Cash: Client Ledger [lender client] (receipt of mortgage funds)
- (If relevant) DR Client Cash (balance of purchase price from buyer’s solicitors)
- (If relevant) CR Client Ledger: [borrower client] Client Cash (balance of purchase price from
buyer’s solicitors)

There is no transaction on the date where you receive completion statement from seller’s solicitors.

Pay purchase price to seller’s solicitor / On Completion
[Before we can send the purchase price to S’s solicitors, need to transfer mortgage advance
from lender’s Client Ledger to B’s Client Ledger; this will not be highlighted in exam]
- DR Client Ledger: lender client (transfer of mortgage advance)
- CR Client Ledger: borrower client (transfer of mortgage advance)

- DR Client Ledger: borrower client (pay purchase price minus deposit to seller’s solicitors)
- CR Client Cash: Client Ledger [borrower client] (pay purchaser price minus deposit to seller’s
solicitors)
[If the deposit had been paid to seller’s solicitors previously (see instructions and prev
transactions), deduct deposit that has already been received from this purchase price to get
the correct amount.]

[You may need to write this entry if they prompt you “You also make the necessary entries to
show that these funds are to be used by borrower for their purchase”]

Unique example where buyer took a bridging loan from lender A to pay for deposit, and then
arranged mortgage of whole purchase price from lender B (see post SGS 2 Activity 2)

17 February: Your firm receives £100,000 from Walker Bank plc in respect of the bridging loan.
- DR Client cash 100,000
- CR Client ledger: David Vernon 100,000

14 March: You receive the mortgage advance of £1 million from Fringe Finance plc.
- DR Client cash £1,000,000
- CR Client ledger: David Vernon 1,000,000

15 March: Completion takes place and, from the funds available at that time, you repay the
bridging loan to Walker Bank plc, together with interest of £410.

Transaction 15 March (a) - Send to seller’s solicitors / on completion
- DR Client ledger: David Vernon 900,000
- CR Client cash 900,000

Transaction 15 March (b) - Repay bridging loan
- DR Client ledger: David Vernon 100,410
- CR Client cash 100,410


Property Property - Exchange and Completion - Seller
Trxn - If seller is stakeholder
Seller Receipt of deposit at exchange of contracts are: