Client money received: A client, Mr. Smith, provides a cheque for £500 as an advance payment
for legal costs. The firm records this as DR Client Cash £500, CR Client Ledger (Mr. Smith)
£500.
Client money withdrawn: The firm pays a court fee of £100 on behalf of Mr. Smith, using the
money he previously deposited. The ledger entry would be DR Client Ledger (Mr. Smith) £100,
CR Client Cash £100
Invoice sent to client: A bill of costs for £1,000 is issued to Ms. Jones for work completed. The
firm records this as DR Office Ledger (Ms. Jones) £1,000, CR Profit Costs £1,000.
Client pays invoice: Ms. Jones pays her £1,000 invoice with a cheque. The firm records this as DR
Office Cash £1,000, CR Office Ledger (Ms. Jones) £1,000
Settling invoice from Client Account: Mr. Smith instructs the firm to settle his £250 bill by
transferring money from his client account to the office account. The entries would be 1a. DR
Client Ledger (Mr. Smith) £250, CR Client Cash £250, 1b. CR Office Ledger £250 DR
Office Cash £250.
Split cheque: The firm receives a cheque for £1,500, where £1,000 is for an invoice and £500
is for future costs. The firm records this as DR office cash £1,000, CR office ledger £1,000,
DR client cash £500, CR client ledger £500
Dishonoured cheque: The firm attempts to deposit a £500 cheque from a client, but it is
returned by the bank. The firm records this as CR office cash £500, DR office ledger £500,
CR client ledger £500, DR client cash £500
Paying money to client i.e. sending a cheque to a client: The firm refunds £50 to a client
from their client account after the case is closed. The firm records this as DR Client Ledger
(Client Name) £50, CR Client Cash £50
Petty cash spent: The firm uses £20 from petty cash to pay for a client's taxi fare. The firm
records this as DR Office Ledger (Client Name) £20, CR Petty Cash £20.
Petty cash returned: The firm replenishes £20 to the petty cash. The firm records this as CR
Office Ledger £20, DR Office Cash £20.
Firm pays money to a client: The firm pays £100 to a client for a refund using office money.
The firm records this as DR Office Ledger (Client Name) £100, CR Office cash £100
Cheque made payable to the client: The firm receives a cheque for £500 made out to the
client. No entry is made, but a note is made in the client ledger that the cheque was
received and forwarded
Exchange of Contracts – PROPERTY TRANSACTIONS:
Receipt of deposit from buyer: The firm receives a deposit of £5,000 from the buyer. The
firm records this as CR client ledger (buyer client) £5,000, DR client cash £5,000.
Payment of deposit to seller's solicitor: The firm pays the £5,000 deposit to the seller's
solicitor. The firm records this as DR Client ledger (buyer client) £5,000, CR Client Cash
£5,000.
Stakeholder at exchange: The firm holds a £5,000 deposit as a stakeholder. The firm records
this as CR Client Ledger (Stakeholder) £5,000, DR Client Cash £5,000
SS Completion – stakeholder: On completion, the £5,000 held as stakeholder now belongs to
the seller. The firm records this as DR Client Ledger (Stakeholder) £5,000 CR Client
Ledger (Seller Client) £5,000
SS pay to client – stakeholder: Scenario: You're a solicitor holding a buyer's deposit (£5,000)
until a property sale is completed. Once completed, this money needs to go to your client, the
seller3. (Transfer of deposit on completion) Money Changes Hands (on completion): The
,£5,000 deposit, initially held by you as a "stakeholder" (meaning you're holding it neutrally), now
legally belongs to the seller. To reflect this change, you perform the following bookkeeping to
change which ledger the money is in: DR Client Ledger: Stakeholder £5,000 - This reduces the
balance in the stakeholder ledger. CR Client Ledger: Seller Client £5,000 - This increases the
balance in the seller's ledger. This step is like moving money from one virtual pocket (stakeholder)
to another (seller), all within your firm's client account. Payment to the Client: You then pay the
£5,000 to your client, the seller. This is recorded as: DR Client Ledger: Seller Client £5,000 -
This reduces the balance in the seller's ledger. CR Client Cash £5,000 - This shows the money
leaving the firm's client bank account. This is the actual transfer of funds out of the client account
to the client. In essence, the first step is an internal transfer on paper (or in the computer system)
to acknowledge the change in ownership. The second step is the actual payment of the money to
the seller.
SS Exchange and pay to client - agent. Exchange contracts and receive the deposit
from BS: The solicitor receives the £5,000 deposit from the buyer's solicitor. CR Client
Ledger: Seller Client £5,000; DR Client Cash £5,000. This entry reflects the cheque being
received and paid out to the seller client. Because the solicitor is acting as an agent for the
seller, they can hand over the money to the seller before completion
SS Exchange and pay to client - agent. Pay the deposit: The solicitor then pays the £5,000
to the Seller Client. DR Client Ledger: Seller Client £5,000; CR Client Cash £5,000. This
entry records the payment of the deposit to the seller.
MORTGAGE FUNDS
Receipt of mortgage funds: The firm receives £100,000 from the lender. The firm records this
as CR Client Ledger (Buyer/Borrower) £100,000 DR Client Cash £100,000. Upon
completion, when mortgage funds are transferred: Debit (DR) Client Ledger: Lender
£100,000. Credit (CR) Client Ledger: (Buyer/Borrower) £100,000
Lender costs (no separate ledger): A solicitor is acting for a buyer in a property transaction.
The buyer is also paying for the lender's costs. The solicitor issues a bill of costs for these lender
costs, and a separate ledger is not used for the lender. The total bill for lender costs is £500. Here's
how the transaction would be recorded: DR Office Ledger: Lender £500; CR Profit Costs £500.
This entry reflects the buyer/seller paying for the lender’s costs, and the issuing of a bill of costs1.
Since there is no separate ledger, it is recorded as a debit to the office ledger and a credit to profit
costs.
Lender costs (separate ledger): You're a solicitor and your client, the buyer, is paying the
lender's legal fees of £500. You're using a separate ledger to keep track of transactions related to
the lender.
Here's how you'd record it:
1. Initial Bill to Lender: You first record that the lender is owed £500 for their costs.
- DR Office Ledger: Lender £500 - This increases what the buyer owes to the lender.
- CR Profit Costs £500 - This increases your firm's profit.
2. Buyer Now Responsible: Since the buyer is paying, you shift the responsibility for the
debt from the lender to the buyer.
- DR Office Ledger: Buyer £500 - This increases what the buyer owes in total.
- CR Office Ledger: Lender £500 - This decreases what the buyer owes to the lender,
as it's now part of the overall bill to the buyer. This step is essentially reassigning the
debt.
3. Money from Buyer's Account: You take £500 from the buyer's client account.
- DR Client Ledger: Buyer £500 - This reduces the balance in the buyer's client
account.
- CR Client Cash £500 - This shows the money leaving the firm's client bank account.
4. Money to Office Account: Finally, you transfer the £500 into your firm's office account.
- CR Office Ledger: Buyer £500 - This decreases what the buyer owes in total.
- DR Office Cash £500 - This shows the money entering the firm's office bank account.
, In simple terms: You initially bill the lender, then transfer the debt to the buyer, take the money
from the buyer's client account, and move it to your firm's account.
Lender costs (separate ledger) where VAT is involved: Scenario: A solicitor is acting for a
buyer in a property transaction. The buyer is paying for the lender's costs, and a separate ledger is
used for the lender. The lender's costs are £500, plus £100 VAT.
Here's how the transactions would be recorded: DR Office Ledger: Lender (£500 exc VAT); CR
Profit Costs (£500 exc. VAT). This entry records the initial bill issued to the lender for their
costs, excluding VAT.
DR Office Ledger: Buyer (£100 Vat no.); CR VAT Account (£100 Vat no.) This entry records
the VAT charged to the buyer.
DR Office Ledger: Buyer (£600 total); CR Office Ledger: Lender (£600 total). This entry
shifts the debt from the lender to the buyer and shows that the borrower is paying these costs. The
total amount, including VAT, is transferred.
Mortgage redemption (no separate ledger) record in ledger of seller-borrower:
Scenario: You're a solicitor and you're helping your client (the seller) pay off their old mortgage
using the money from their house sale. The mortgage payoff is £150,000, and after that, you need
to give them the rest of the sale money which is £150,000 as the total sale proceed is £300,000.
You're not using a separate ledger for the mortgage lender.
Here's how you record it in the seller's account:
1. Pay off the Mortgage: You pay £150,000 to the lender to clear the seller's mortgage
- CR client ledger: Seller £150,000 - This lowers the amount of money you hold for
the seller.
- DR client cash £150,000 - This shows the money leaving the firm's bank account.
2. Give Remaining Money to Seller: You pay the remaining £150,000 to the seller.
- DR client ledger: Seller £150,000 - This further lowers the amount of money you
hold for the seller.
- CR client cash £150,000 - This shows the money leaving the firm's bank account.
Essentially, you're using the seller's account to show the mortgage payment going out and the
remaining balance being returned to them.
Mortgage redemption (separate ledger) receipt of mortgage in advance of completion:
Scenario: A solicitor is acting for a seller (Seller Client) who needs to pay off their existing
mortgage of £150,000 using the funds from the property sale. The total sale proceeds received are
£300,000. A separate ledger is used for the lender.
Here's how the transactions would be recorded:
1. Receipt of Sale Funds: The solicitor receives the total sale proceeds of £300,000, which gets
paid into the seller's ledger.
- CR client ledger: Seller £300,000 - This increases the balance in the seller's client
ledger, reflecting the total sale proceeds received.
- DR client cash £300,000 - This shows the money entering the firm's client bank account.
2. Transfer to Lender Client Ledger: The solicitor transfers £150,000 from the seller's client
ledger to the lender's client ledger, representing the amount required to redeem the mortgage.
o DR client ledger: Seller £150,000 - This reduces the balance in the seller's
client ledger, reflecting the transfer to the lender.
o CR client ledger: Lender £150,000 - This increases the balance in the lender's
client ledger, reflecting the receipt of funds for mortgage redemption.
o Note: Because this is a transfer between ledgers and no cash is exchanged, there
is no client cash entry.
3. Mortgage Redemption Payment: The solicitor pays £150,000 to the lender to discharge the
seller's mortgage.
for legal costs. The firm records this as DR Client Cash £500, CR Client Ledger (Mr. Smith)
£500.
Client money withdrawn: The firm pays a court fee of £100 on behalf of Mr. Smith, using the
money he previously deposited. The ledger entry would be DR Client Ledger (Mr. Smith) £100,
CR Client Cash £100
Invoice sent to client: A bill of costs for £1,000 is issued to Ms. Jones for work completed. The
firm records this as DR Office Ledger (Ms. Jones) £1,000, CR Profit Costs £1,000.
Client pays invoice: Ms. Jones pays her £1,000 invoice with a cheque. The firm records this as DR
Office Cash £1,000, CR Office Ledger (Ms. Jones) £1,000
Settling invoice from Client Account: Mr. Smith instructs the firm to settle his £250 bill by
transferring money from his client account to the office account. The entries would be 1a. DR
Client Ledger (Mr. Smith) £250, CR Client Cash £250, 1b. CR Office Ledger £250 DR
Office Cash £250.
Split cheque: The firm receives a cheque for £1,500, where £1,000 is for an invoice and £500
is for future costs. The firm records this as DR office cash £1,000, CR office ledger £1,000,
DR client cash £500, CR client ledger £500
Dishonoured cheque: The firm attempts to deposit a £500 cheque from a client, but it is
returned by the bank. The firm records this as CR office cash £500, DR office ledger £500,
CR client ledger £500, DR client cash £500
Paying money to client i.e. sending a cheque to a client: The firm refunds £50 to a client
from their client account after the case is closed. The firm records this as DR Client Ledger
(Client Name) £50, CR Client Cash £50
Petty cash spent: The firm uses £20 from petty cash to pay for a client's taxi fare. The firm
records this as DR Office Ledger (Client Name) £20, CR Petty Cash £20.
Petty cash returned: The firm replenishes £20 to the petty cash. The firm records this as CR
Office Ledger £20, DR Office Cash £20.
Firm pays money to a client: The firm pays £100 to a client for a refund using office money.
The firm records this as DR Office Ledger (Client Name) £100, CR Office cash £100
Cheque made payable to the client: The firm receives a cheque for £500 made out to the
client. No entry is made, but a note is made in the client ledger that the cheque was
received and forwarded
Exchange of Contracts – PROPERTY TRANSACTIONS:
Receipt of deposit from buyer: The firm receives a deposit of £5,000 from the buyer. The
firm records this as CR client ledger (buyer client) £5,000, DR client cash £5,000.
Payment of deposit to seller's solicitor: The firm pays the £5,000 deposit to the seller's
solicitor. The firm records this as DR Client ledger (buyer client) £5,000, CR Client Cash
£5,000.
Stakeholder at exchange: The firm holds a £5,000 deposit as a stakeholder. The firm records
this as CR Client Ledger (Stakeholder) £5,000, DR Client Cash £5,000
SS Completion – stakeholder: On completion, the £5,000 held as stakeholder now belongs to
the seller. The firm records this as DR Client Ledger (Stakeholder) £5,000 CR Client
Ledger (Seller Client) £5,000
SS pay to client – stakeholder: Scenario: You're a solicitor holding a buyer's deposit (£5,000)
until a property sale is completed. Once completed, this money needs to go to your client, the
seller3. (Transfer of deposit on completion) Money Changes Hands (on completion): The
,£5,000 deposit, initially held by you as a "stakeholder" (meaning you're holding it neutrally), now
legally belongs to the seller. To reflect this change, you perform the following bookkeeping to
change which ledger the money is in: DR Client Ledger: Stakeholder £5,000 - This reduces the
balance in the stakeholder ledger. CR Client Ledger: Seller Client £5,000 - This increases the
balance in the seller's ledger. This step is like moving money from one virtual pocket (stakeholder)
to another (seller), all within your firm's client account. Payment to the Client: You then pay the
£5,000 to your client, the seller. This is recorded as: DR Client Ledger: Seller Client £5,000 -
This reduces the balance in the seller's ledger. CR Client Cash £5,000 - This shows the money
leaving the firm's client bank account. This is the actual transfer of funds out of the client account
to the client. In essence, the first step is an internal transfer on paper (or in the computer system)
to acknowledge the change in ownership. The second step is the actual payment of the money to
the seller.
SS Exchange and pay to client - agent. Exchange contracts and receive the deposit
from BS: The solicitor receives the £5,000 deposit from the buyer's solicitor. CR Client
Ledger: Seller Client £5,000; DR Client Cash £5,000. This entry reflects the cheque being
received and paid out to the seller client. Because the solicitor is acting as an agent for the
seller, they can hand over the money to the seller before completion
SS Exchange and pay to client - agent. Pay the deposit: The solicitor then pays the £5,000
to the Seller Client. DR Client Ledger: Seller Client £5,000; CR Client Cash £5,000. This
entry records the payment of the deposit to the seller.
MORTGAGE FUNDS
Receipt of mortgage funds: The firm receives £100,000 from the lender. The firm records this
as CR Client Ledger (Buyer/Borrower) £100,000 DR Client Cash £100,000. Upon
completion, when mortgage funds are transferred: Debit (DR) Client Ledger: Lender
£100,000. Credit (CR) Client Ledger: (Buyer/Borrower) £100,000
Lender costs (no separate ledger): A solicitor is acting for a buyer in a property transaction.
The buyer is also paying for the lender's costs. The solicitor issues a bill of costs for these lender
costs, and a separate ledger is not used for the lender. The total bill for lender costs is £500. Here's
how the transaction would be recorded: DR Office Ledger: Lender £500; CR Profit Costs £500.
This entry reflects the buyer/seller paying for the lender’s costs, and the issuing of a bill of costs1.
Since there is no separate ledger, it is recorded as a debit to the office ledger and a credit to profit
costs.
Lender costs (separate ledger): You're a solicitor and your client, the buyer, is paying the
lender's legal fees of £500. You're using a separate ledger to keep track of transactions related to
the lender.
Here's how you'd record it:
1. Initial Bill to Lender: You first record that the lender is owed £500 for their costs.
- DR Office Ledger: Lender £500 - This increases what the buyer owes to the lender.
- CR Profit Costs £500 - This increases your firm's profit.
2. Buyer Now Responsible: Since the buyer is paying, you shift the responsibility for the
debt from the lender to the buyer.
- DR Office Ledger: Buyer £500 - This increases what the buyer owes in total.
- CR Office Ledger: Lender £500 - This decreases what the buyer owes to the lender,
as it's now part of the overall bill to the buyer. This step is essentially reassigning the
debt.
3. Money from Buyer's Account: You take £500 from the buyer's client account.
- DR Client Ledger: Buyer £500 - This reduces the balance in the buyer's client
account.
- CR Client Cash £500 - This shows the money leaving the firm's client bank account.
4. Money to Office Account: Finally, you transfer the £500 into your firm's office account.
- CR Office Ledger: Buyer £500 - This decreases what the buyer owes in total.
- DR Office Cash £500 - This shows the money entering the firm's office bank account.
, In simple terms: You initially bill the lender, then transfer the debt to the buyer, take the money
from the buyer's client account, and move it to your firm's account.
Lender costs (separate ledger) where VAT is involved: Scenario: A solicitor is acting for a
buyer in a property transaction. The buyer is paying for the lender's costs, and a separate ledger is
used for the lender. The lender's costs are £500, plus £100 VAT.
Here's how the transactions would be recorded: DR Office Ledger: Lender (£500 exc VAT); CR
Profit Costs (£500 exc. VAT). This entry records the initial bill issued to the lender for their
costs, excluding VAT.
DR Office Ledger: Buyer (£100 Vat no.); CR VAT Account (£100 Vat no.) This entry records
the VAT charged to the buyer.
DR Office Ledger: Buyer (£600 total); CR Office Ledger: Lender (£600 total). This entry
shifts the debt from the lender to the buyer and shows that the borrower is paying these costs. The
total amount, including VAT, is transferred.
Mortgage redemption (no separate ledger) record in ledger of seller-borrower:
Scenario: You're a solicitor and you're helping your client (the seller) pay off their old mortgage
using the money from their house sale. The mortgage payoff is £150,000, and after that, you need
to give them the rest of the sale money which is £150,000 as the total sale proceed is £300,000.
You're not using a separate ledger for the mortgage lender.
Here's how you record it in the seller's account:
1. Pay off the Mortgage: You pay £150,000 to the lender to clear the seller's mortgage
- CR client ledger: Seller £150,000 - This lowers the amount of money you hold for
the seller.
- DR client cash £150,000 - This shows the money leaving the firm's bank account.
2. Give Remaining Money to Seller: You pay the remaining £150,000 to the seller.
- DR client ledger: Seller £150,000 - This further lowers the amount of money you
hold for the seller.
- CR client cash £150,000 - This shows the money leaving the firm's bank account.
Essentially, you're using the seller's account to show the mortgage payment going out and the
remaining balance being returned to them.
Mortgage redemption (separate ledger) receipt of mortgage in advance of completion:
Scenario: A solicitor is acting for a seller (Seller Client) who needs to pay off their existing
mortgage of £150,000 using the funds from the property sale. The total sale proceeds received are
£300,000. A separate ledger is used for the lender.
Here's how the transactions would be recorded:
1. Receipt of Sale Funds: The solicitor receives the total sale proceeds of £300,000, which gets
paid into the seller's ledger.
- CR client ledger: Seller £300,000 - This increases the balance in the seller's client
ledger, reflecting the total sale proceeds received.
- DR client cash £300,000 - This shows the money entering the firm's client bank account.
2. Transfer to Lender Client Ledger: The solicitor transfers £150,000 from the seller's client
ledger to the lender's client ledger, representing the amount required to redeem the mortgage.
o DR client ledger: Seller £150,000 - This reduces the balance in the seller's
client ledger, reflecting the transfer to the lender.
o CR client ledger: Lender £150,000 - This increases the balance in the lender's
client ledger, reflecting the receipt of funds for mortgage redemption.
o Note: Because this is a transfer between ledgers and no cash is exchanged, there
is no client cash entry.
3. Mortgage Redemption Payment: The solicitor pays £150,000 to the lender to discharge the
seller's mortgage.
