Summary ULAW LPC, Solicitors Accounts Chapter Readings

Intro to PP – WS1 Solicitors Accounts TIFF LIAO
Chapter 9 – Transfers page 121

INTRODUCTION

RULE 8.1(a) requires firms to record on each client ledgers account all client and business money receipts and payments
made for that client on the CLIENT and BUSINESS section of the accounts, as appropriate.

cash transfer = when client money is withdrawn from the client bank account and paid into another business
account (pay firms charges) this must be recorded

inter-client transfer = is a firm is holding money in the client bank account for one client and stops holding money
to the order of the first client and starts holding it to the order of a second client, this is a change of ownership of
money


SUMMARY

 Cash transfers = from one bank account to another involves:
Cash PAYMENT from one bank account
Cash RECIEPT into the other

 One pair of entries records the payment
One pair of entries record the receipt

 Inter-client transfers do NOT involve the movement of cash
The cash remains in the client bank account
It is movement of OWNERSHIP

 To record an inter-client transfer there is:
DR in the CLIENT section of he transferors ledge account; AND
CR entry in the CLIENT section of the transfers ledger account




CASH TRANSFERS

Why might it occur?

Payment of firms Once a bill has been issued, the firm can transfer money from the client bank account to the
professional fees + business bank account for its own professional fees including:
disbursements  VAT
 Any disbursements included on the bill

 RULE 5 = a firm can withdraw money from the client bank account in reimbursements
of paid disbursements provided this was within the purpose for which the money was
being held

Other reasons (a) Advance money to a client or trust where the solicitor needs to make a payment on
behalf of the client or trust and insufficient client money is available
Once advanced, the money becomes client money

(b) To replace money withdrawn in breach of RULE 5.3

(c) To allow the client a sum of lieu of interest




Recording a transfer from client to BUSINESS bank account
This is done in TWO parts:

(1) Record the PAYMENT of money from the CLIENT bank account:
CR CASH account
DR CLIENTS ledger account

(2) Record the RECEIPT of money into the BUSINESS bank account:
DR CASH account
CR CLIENTS ledger account

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, Intro to PP – WS1 Solicitors Accounts TIFF LIAO
Chapter 9 – Transfers page 121
Example
You act for Green. On 10 April you receive £800 from Green on account of costs to be incurred.
On 26 April, you send Green a bill for £400 + VAT
On 28 April, you transfer £480 from the CLIENT bank account to the BUSINESS bank account

Entries are as follows:
(1) Received £800 from Green on Account of costs incurred:

CLIENT: GREEN
MATTER: MISCELLANEOUS

Date Details Business Account Client Account
April Balance DR CR BAL DR CR BAL
Cash
10 Cash. From 800 800 CR
Green. On
Account

£800 is client money
Recorded in Green’s ledger account in the CASH account

CASH ACCOUNT

Date Details Business Account Client Account
April Balance DR CR BAL DR CR BAL
Cash
10 Green 800 xxx

(2) A Bill is issued
CLIENT: GREEN
MATTER: MISCELLANEOUS

ate Details Business Account Client Account
April Balance DR CR BAL DR CR BAL
Cash
10 Cash. From 800 800 CR
Green. On
Account
26 Profit 400 400 DR
Costs
26 VAT 80 480 DR


Entries for profit costs and VAT
ALWAYS on the BUSINESS section
to show that the client owes us
money

CR entry will be on the PROFIT costs and HMRC account – not shown

(3) Payment from client account
Will look like this:
DR Greens ledger
CR CASH CLIENT SECTION

CLIENT: GREEN
MATTER: MISCELLANEOUS
Date Details Business Account Client Account
April Balance DR CR BAL DR CR BAL
Cash
10 Cash. From 800 800 CR
Green. On
Account
26 Profit Costs 400 400 DR
26 VAT 80 480 DR

28 Cash. Transfer 480 320 CR
from client
account
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