SUMMARY SOLICITORS ACCOUNTS UPGRADED EXAM WITH CORRECT ANSWERS

SUMMARY SOLICITORS ACCOUNTS UPGRADED EXAM WITH CORRECT ANSWERS The Overarching Objective: - CORRECT ANSWER-Rule 1.1 of SRA Accounts Rule - To keep client money safe Office Money: - CORRECT ANSWER-Belongs to firm Client Money: - CORRECT ANSWER-Belongs to clients. Rule 12 SRA 12.2 & 12.7: - CORRECT ANSWER-set out the distinctions between what is client money and what is office money. Rule 12.7 is the main rule listing examples of what is office money Out of scope money: - CORRECT ANSWER-money received by a multi-disciplinary partnership in relation to activities not regulated by the SRA. (IGNORE) Accounting Records Part 4 of Rules (26-30): - CORRECT ANSWER-specifies in detail how the accounts of Solicitors must be kept. Rule 29 states that every Solicitor must at all times keep properly written-up accounts. Rules 13-21 - CORRECT ANSWER-deals with what funds should be kept in each account. Look at Rules 14,17,18 & 20 in particular. 3 Basic Rules of solicitor's accounts: - CORRECT ANSWER-1. There will always be 2 entries for every transaction (double entry book-keeping) 2. One of each pair will be a credit entry (CR) and the other a debit entry (DR). 3. Either both entries will be in client or both entries will be in office, you can never have a pair of entries where one will be in client & the other is in office Entries in client ledgers: - CORRECT ANSWER-In client ledger section withdrawing money is a debit entry and paying money in is a credit entry. In office ledger section sending bill or paying money out is a debit entry and when client pays bill or pays money in that is a credit entry. Entries into bank accounts: - CORRECT ANSWER-Withdrawing money is a credit entry in office cash. Paying money in is a debit entry in client cash. Confused?? Remember that ledgers are logical - debit and credit entries work as you would expect. So when entering a pair of entries make entries into the client ledger client ledger section first then office ledger section then into bank account ledgers second. Suggested approach: - CORRECT ANSWER-Step 1: Is this a client or office transaction? (money on account of costs = client/sending bill = office) Step 2: Complete the client ledger first Step 3: Is money coming in or going out/creating a debt? Step 4: Complete the other part of the double entry (NB never mix client and office entries) Step 5: Complete Date, Details and Balance Making entries: - CORRECT ANSWER-Every entry must contain the following: (1) Date, (2) Name of double entry ledger (cross reference) (3) Description (4) CR or DR entry? (5) Balance including CR or DR. Client Money & Client Account: - CORRECT ANSWER-Belongs to clients. Clients are the person for whom you act. Keep client money separate from firm's money. However, consider if client is a principal of the firm then Rule 12.8 applies its office money. Client Money & Client Account: 12.8(a) & 12.8 (b) & 12.8 (c) - CORRECT ANSWERjointly with spouse, mortgage & employee. Client Money & Client Account: Rule 12 - CORRECT ANSWER-defines client money. Consider Rule 12.2 (e) money received from client on account of costs, 12.2 (d) money received in respect of unpaid disbursements & 12.2 (a) money held as trustee. Rule 14.1 client money must be paid into client account. Client Money & Client Account:Exceptions: - CORRECT ANSWER-(1)Rules 15 & 16.1 (c) client instructions, (2) Rule 16 cash received & paid out and cheque received & endorsed, (3) 17.1 (b)unpaid professional disbursements and (4) cheques not payable to firm. Client Money & Client Account: When are you permitted to pay money out of the client account? - CORRECT ANSWER-Rule 20.1(a), Rule 20.1(c), Rule 20.1(d), 20.1 (a) & (e), Rule 20.1 (f), Rules 17.2 & 3, Rule 17, Rule 18, Rule 20.1 (i). Office Money & Office Account Rule 1.2(a) - CORRECT ANSWER-clients' money must be kept separate from office money. Office money is money that belongs to the firm. Rule 12.7(a). Office money should be paid into office account. Rules 1.2(a) & b & rules 14.1 & 14.2 Office Money & Office Account: Rule 17.1(a) (i) - CORRECT ANSWER-money received from the client in settlements of a bill of costs is office money & must generally be paid into office account. Money received from client in full or partial reimbursements of disbursements is also office money