IPP LPC Solicitors Accounts Notes (Full notes for exam)

Solicitor’s Accounts Exam Information ⇒ 4 sections in 2 hours o Client ledgers (property, probate, sale of business, litigation matter) – more than one client in exam: how many clients? ▪ Use pencil in exam o Written questions on the Rules – 64 marks with above o Financial Statement (in the context of property transaction) – 16 marks ▪ Use pencil in exam o 5 MCQ’s - 20 marks ▪ Be aware of ‘must, never and always’ as some rules have exceptions Categories of Money *A client bank account must be held at a bank or building society in England and Wales and must include the name of the firm and the word ‘client’. *Client money must be returned as soon as there is no longer any proper reason to hold those funds Issuing Bills 2.1(b) Money held as stakeholder 2.1(c) Money held as trustee 2.1(d) Payments generally on account of professional charges and unpaid disbursements is a payment of client money CLIENT MONEY BUSINESS MONEY Rule 2.1 (a person for whom you act) – Is a receipt of client money? *It will not be client money if cheque is not made out to the firm. Rule 2.3 The cheque must be paid into the client bank account promptly - Subject to exception (2.3(c): an alternative arrangement can be agreed in writing. - Check if facts express agreement in writing or orally. If orally, the request will not be sufficient. In writing is required. Rule 8.1(a) The receipt must be recorded as a credit entry on the client side of a client ledger Rule 5.3 Firms must never withdraw more client money for a client than is held in the client bank account. Instead, funds are taken from business bank account and bill must be issued to transfer money from client account to business account. - Example exam comment: ‘as the firm holds no money for Angela in the client bank account the payment can only be made from the firm’s own business bank account’ In Payment of Bills Money received for billed professional charges and disbursements – both paid and unpaid falls outside the definition of client money. The entire sum must be paid into the business bank account. Rule 8.1(b) The receipt must be recorded as a credit entry on the business side of client ledger. Rule 5.3 If firm holds no money in client bank account, the payment can only be made from firm’s own business bank account - However, the firm could make a payment from a general client bank account if sufficient money is being held for the client in a separate designated deposit bank account OPTIONS: INSUFFICIENT MONEY IN CLIENT BANK ACCOUNT 1. Payment can be made from firm’s own business bank account (the firm cannot transfer money from the client bank account or business bank account in partial reimbursement without having first delivered a bill) – Rule 4.3 2. The firm can lend small money by transferring amount from business bank account to client account. Once ‘lent’ to the client the money becomes client money/ entire payment made from client bank account. 3. The firm can also pay using two cheques, part from the business bank account and part from the client bank account.