Solicitors Accounts
3 Basic Rules of solicitor's accounts: - 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
Abatement of Costs - How is it Recorded: - ANSWER CR Office ledger & DR Profit Costs. CR
Office ledger for VAT, DR VAT account.
Abatement of Costs -definition: - ANSWER when solicitor reduces fees.
Accounting Records Part 4 of Rules (26-30): - 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.
Bad Debts: How to write off bad debts: - ANSWER CR Office Ledger for the client with the
amount of the unpaid debts excluding any VAT (if app), DR bad & doubtful debts accounts, CR office
ledger for the client with the amount of VAT in respect of unpaid debt, DR VAT account.
Capital Account: - ANSWER When acting on behalf of firm's partners must consider Rule
12.8 any money received from the partner is office money. Also that a partner's contribution to the
firm is called capital & often kept in a separate capital account. You must record entries as you would
need to enter entries in Capital Account & in Bank Account. E.G. any money received would be CR in
the capital account office ledger & DR in bank account.
Client Money & Client Account: - 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) - ANSWER jointly with spouse,
mortgage & employee.
Client Money & Client Account: Rule 12 - 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: When are you permitted to pay money out of the client account? -
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).
Client Money & Client Account:Exceptions: - 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: - ANSWER Belongs to clients.
De Minimis Rule - ANSWER Rule 22 - usually £20 if you hold a small amount for a long time
or a large amount for a short period of time
, Solicitors Accounts
Deposits - Accounting records for receipt of deposit are as follows: - ANSWER CR client
ledger DR client cash.
Deposits - If holding as agent: - ANSWER Deposit belongs to seller from exchange so CR
Client ledger & DR Client cash. DR Client ledger CR Client cash.
Deposits - if holding deposit as stakeholder as following entries need to be made: On Exchange: -
ANSWER CR Client ledger stakeholder, DR Client Cash.
Deposits - Payment of the deposit to seller's solicitors - ANSWER DR Client ledger & CR
Client Cash.
Deposits -if holding deposit as stakeholder as following entries need to be made On completion: -
ANSWER DR Client ledger: stakeholder & CR Client Ledger.
Disbursements Exception: - ANSWER Unpaid professional disbursements - if received an
invoice but not yet paid it any money received from client in respect of that invoice is client money
Rules 12.2(c) & 12.7(c) (iii
Disbursements Rule 12.7(c) (ii) - - ANSWER if the solicitor has already paid the
disbursement then the client's cheque in reimbursement is treated as office money.
Disbursements Rule 12.7(c)(iii) - ANSWER if a solicitor has incurred a disbursement but not
yet paid it then any money received from the client is also treated as office money.
Disbursements: Rule 12.2(d) & Rule 12 Guidance note (i) - ANSWER - if a solicitor has not
yet paid the disbursement then any sums received from the client in anticipation of those
disbursements are client money.
Entries in client ledgers: - 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: - 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.
Financial Statements: - ANSWER No standard layout. Only requirement is that the
statement should include every relevant financial item & show the balance of money due to or from
client. VAT must shown separately on statement except when solicitor is paying disbursements as an
agent then amount inclusive of VAT must be shown.
Interest - 3 Rules 22-25: - ANSWER account for interest where fair & reasonable to do so,
have a written policy on payment of interest & in appropriate circs firm may contract out of interest
rules.
Interest - de Minimis level Rule 22 Guidance Note (i) (e)- - ANSWER firms should set a de
Minimis, a minimum amount of interest level which if interest is less than then that sum would be
retained by firm instead of given to client. The sum of £20 is expressly mentioned in guidance note (i)
(e).
3 Basic Rules of solicitor's accounts: - 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
Abatement of Costs - How is it Recorded: - ANSWER CR Office ledger & DR Profit Costs. CR
Office ledger for VAT, DR VAT account.
Abatement of Costs -definition: - ANSWER when solicitor reduces fees.
Accounting Records Part 4 of Rules (26-30): - 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.
Bad Debts: How to write off bad debts: - ANSWER CR Office Ledger for the client with the
amount of the unpaid debts excluding any VAT (if app), DR bad & doubtful debts accounts, CR office
ledger for the client with the amount of VAT in respect of unpaid debt, DR VAT account.
Capital Account: - ANSWER When acting on behalf of firm's partners must consider Rule
12.8 any money received from the partner is office money. Also that a partner's contribution to the
firm is called capital & often kept in a separate capital account. You must record entries as you would
need to enter entries in Capital Account & in Bank Account. E.G. any money received would be CR in
the capital account office ledger & DR in bank account.
Client Money & Client Account: - 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) - ANSWER jointly with spouse,
mortgage & employee.
Client Money & Client Account: Rule 12 - 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: When are you permitted to pay money out of the client account? -
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).
Client Money & Client Account:Exceptions: - 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: - ANSWER Belongs to clients.
De Minimis Rule - ANSWER Rule 22 - usually £20 if you hold a small amount for a long time
or a large amount for a short period of time
, Solicitors Accounts
Deposits - Accounting records for receipt of deposit are as follows: - ANSWER CR client
ledger DR client cash.
Deposits - If holding as agent: - ANSWER Deposit belongs to seller from exchange so CR
Client ledger & DR Client cash. DR Client ledger CR Client cash.
Deposits - if holding deposit as stakeholder as following entries need to be made: On Exchange: -
ANSWER CR Client ledger stakeholder, DR Client Cash.
Deposits - Payment of the deposit to seller's solicitors - ANSWER DR Client ledger & CR
Client Cash.
Deposits -if holding deposit as stakeholder as following entries need to be made On completion: -
ANSWER DR Client ledger: stakeholder & CR Client Ledger.
Disbursements Exception: - ANSWER Unpaid professional disbursements - if received an
invoice but not yet paid it any money received from client in respect of that invoice is client money
Rules 12.2(c) & 12.7(c) (iii
Disbursements Rule 12.7(c) (ii) - - ANSWER if the solicitor has already paid the
disbursement then the client's cheque in reimbursement is treated as office money.
Disbursements Rule 12.7(c)(iii) - ANSWER if a solicitor has incurred a disbursement but not
yet paid it then any money received from the client is also treated as office money.
Disbursements: Rule 12.2(d) & Rule 12 Guidance note (i) - ANSWER - if a solicitor has not
yet paid the disbursement then any sums received from the client in anticipation of those
disbursements are client money.
Entries in client ledgers: - 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: - 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.
Financial Statements: - ANSWER No standard layout. Only requirement is that the
statement should include every relevant financial item & show the balance of money due to or from
client. VAT must shown separately on statement except when solicitor is paying disbursements as an
agent then amount inclusive of VAT must be shown.
Interest - 3 Rules 22-25: - ANSWER account for interest where fair & reasonable to do so,
have a written policy on payment of interest & in appropriate circs firm may contract out of interest
rules.
Interest - de Minimis level Rule 22 Guidance Note (i) (e)- - ANSWER firms should set a de
Minimis, a minimum amount of interest level which if interest is less than then that sum would be
retained by firm instead of given to client. The sum of £20 is expressly mentioned in guidance note (i)
(e).
