SUMMARY SOLICITOR ACCOUNTS EXAM REVIEW (QUESTIONS AND ANSWERS)

SUMMARY SOLICITOR ACCOUNTS EXAM REVIEW (QUESTIONS AND ANSWERS) What is the overarching objective? - CORRECT ANSWER-Rule 1.1 of the SRA Accounts Rules: "The purpose of these rules is to keep client money safe." What is the main way in which the Rules seek to achieve the overarching objective? - CORRECT ANSWER-Rule 1.2(1): By requiring the firm to keep other people's money separate from the firm's own money What is the fundamental rule concerning client money & office money? - CORRECT ANSWER-That these must be kept separate What is Rule 12? - CORRECT ANSWER-Deals with whether money is client money or office money What if a client is a principal of the firm i.e. a partner? - CORRECT ANSWER-Rule 12.8 states that money held or received on behalf of the principal is office money. What is the definition of client money? - CORRECT ANSWER-Money held or received for a client of the firm. It is money that belongs to the client, at least for the time being, e.g. property deposit. What are common examples of client money? - CORRECT ANSWER-1. Money received from the client on account of costs (no fees have yet been incurred so the money belongs to the client) 2. Money received in respect of unpaid disbursements (e.g. SDLT, Land Registry fees and court fees - not yet incurred or paid) 3. Money held as a trustee What is the general rule in relation to disbursements? - CORRECT ANSWER-The general rule is that if a solicitor has not yet paid the disbursement then any sums received from the client in anticipation of those disbursements are client money. If he has already paid the disbursement or has already incurred it, then such sums are treated as office money. What are professional disbursements? - CORRECT ANSWER-The fees of counsel or other lawyer, or of a professional or other agent or expert instructed by you, including the fees of interpreters, translators, process servers, surveyors and estate agents but not travel agents' charges. What is the exception to the general rule on disbursements regarding unpaid professional disbursements? - CORRECT ANSWER-It only becomes office money once the solicitor has actually paid the disbursement, not when the disbursement is incurred. So: if a solicitor receives such an invoice but has not yet paid it, any money received from the client in respect of that invoice is client money. What are the bank accounts? - CORRECT ANSWER-Office bank account: Money belonging to the firm Client bank account: Money belonging to the clients What do rules 13-21 set out? - CORRECT ANSWER-Sets out what money should be put where, and the limited circumstances in which money can be transferred from one bank account to the other. Where does office cash go in the ledger? - CORRECT ANSWER-Money belonging to the firm - left hand side Where does client cash go in the ledger? - CORRECT ANSWER-Money belonging to the clients - right hand side What should the bank accounts ledger reflect? - CORRECT ANSWER-Should reflect exactly what appears in the statements that the bank sends the firm What if no actual cash is changing hands e.g. sending cash to a client? - CORRECT ANSWER-The transaction will not affect the bank accounts What is an office account? - CORRECT ANSWER-Each firm will have one of these, its own bank account from which it will run its business What is the office ledger / office cash? - CORRECT ANSWER-A separate ledger for each individual client, which records how much money that particular client owes the solicitor. What is the client account? - CORRECT ANSWER-Contains all the money held by the firm on behalf of clients What are the client ledgers / client cash? - CORRECT ANSWER-There will be a separate ledger for each client. Transactions which affect the office money on the client's matters will be reflected in the office ledger. What will a client account tell/not tell a solicitor? - CORRECT ANSWER-They will tell a solicitor how much client's money he holds overall - it will not tell him how much of that money belongs to each individual client.