Summary SQE Notes Solicitors' Accounts Notes 2024 Questions with Answers Latest Update, Exams of Accounting

Download Summary SQE Notes Solicitors' Accounts Notes 2024 Questions with Answers Latest Update and more Exams Accounting in PDF only on Docsity! Summary SQE Notes Solicitors' Accounts Notes 2024 Questions with Answers Latest Update 1. The Overarching Objective: - ✓✓✓Rule 1.1 of SRA Accounts Rule - To keep client money safe 2. Office Money: - ✓✓✓Belongs to firm 3. Client Money: - ✓✓✓Belongs to clients. 4. Rule 12 SRA 12.2 & 12.7: - ✓✓✓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 5. Out of scope money: - ✓✓✓money received by a multi-disciplinary partnership in relation to activities not regulated by the SRA. (IGNORE) 6. Accounting Records Part 4 of Rules (26-30): - ✓✓✓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. 7. Rules 13-21 - ✓✓✓deals with what funds should be kept in each account. Look at Rules 14,17,18 & 20 in particular. 8. 3 Basic Rules of solicitor's accounts: - ✓✓✓1. There will always be 2 entries for every transaction (double entry book-keeping) 9. 2. One of each pair will be a credit entry (CR) and the other a debit entry (DR). 10.3. 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 11.Entries in client ledgers: - ✓✓✓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. 12.Entries into bank accounts: - ✓✓✓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. 13.Suggested approach: - ✓✓✓Step 1: Is this a client or office transaction? (money on account of costs = client/sending bill = office) 14.Step 2: Complete the client ledger first 15.Step 3: Is money coming in or going out/creating a debt? 16.Step 4: Complete the other part of the double entry (NB never mix client and office entries) 17.Step 5: Complete Date, Details and Balance 18.Making entries: - ✓✓✓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. to deal with these types of payments e.g. taxi fare. A separate ledger is created. When taking money out must enter Office Cash DR & Office Ledger CR. 33.Capital Account: - ✓✓✓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. 34.Profit Costs definition: - ✓✓✓Fees Solicitor charges to the client for carrying out work on behalf of client. 35.Profit Costs: Rules 12.7(c)(i), 17 & 18. - ✓✓✓Issue of invoice is an office transaction & any money received from client on payment of profit costs is office money. 36.Profit Costs When issuing Bill of costs what entries are made: - ✓✓✓DR office ledger & CR Profit Costs. You then must transfer money from client account to office account to cover costs. Must enter the following entries: DR Client Ledger, CR Client cash & CR Office Ledger & DR office cash. 37.VAT definition: - ✓✓✓For exam purposes standard rate will be 20%. A Solicitor must keep a record of all VAT paid in the VAT account. 38.VAT - How is VAT on profit costs 39.recorded - ✓✓✓by recording profit costs first then DR Office ledger with VAT payable & CR VAT Account with VAT payable 40.VAT - How is VAT on Disbursements recorded (1) Payment of accountant's invoice by solicitor: - ✓✓✓CR Office cash with the net amount of invoice & CR office cash with amount of VAT, DR VAT account with the VAT payable, DR Office ledger for the client with the net amount of the invoice. 41.VAT - How is VAT on Disbursements recorded (2) Solicitor invoices client for the accountant's costs: - ✓✓✓DR Office ledger with profit costs excluding VAT, CR Profit costs, DR Office ledger with VAT & CR VAT Account. 42.VAT - VAT & Lender's costs (1) No separate ledger for lender: - ✓✓✓Both VAT & Profit costs recorded in borrower's office ledger. 43.VAT - VAT & Lender's costs (2) Separate ledgers: - ✓✓✓The profit costs & VAT for each client are recorded in their respective office ledgers & then the lender's costs including VAT are transferred to office ledger in usual way. 44.Abatement of Costs -definition: - ✓✓✓when solicitor reduces fees. 45.Abatement of Costs - How is it Recorded: - ✓✓✓CR Office ledger & DR Profit Costs. CR Office ledger for VAT, DR VAT account. 46.Deposits - Accounting records for receipt of deposit are as follows: - ✓✓✓CR client ledger DR client cash. 47.Deposits - Payment of the deposit to seller's solicitors - ✓✓✓DR Client ledger & CR Client Cash. 48.Deposits - if holding deposit as stakeholder as following entries need to be made: On Exchange: - ✓✓✓CR Client ledger stakeholder, DR Client Cash. 49.Deposits -if holding deposit as stakeholder as following entries need to be made On completion: - ✓✓✓DR Client ledger: stakeholder & CR Client Ledger. 50.Deposits - If holding as agent: - ✓✓✓Deposit belongs to seller from exchange so CR Client ledger & DR Client cash. DR Client ledger CR Client cash. 51.Mortgages - Rule 29.10 - ✓✓✓mortgage funds are treated as client money & it can be recorded in the client ledger of the buyer-client. If funds belonging to client are clearly identifiable & the lender is an institutional lender. If acting for buyer & private lender must open separate ledger for each. 52.Mortgages - entries for same ledger - ✓✓✓CR Client Ledger & DR Client Cash. Separate Ledgers: CR Client ledger for the lender & DR Client cash then DR Client ledger for buyer & CR Client ledger for the buyer/borrower. 53.When acting for buyer/seller & lender it us usual for buyer/seller to pay lender's costs. 54.Mortgages - When no separate ledger Profit costs will be recorded as follows - ✓✓✓: DR Office ledger & CR Profit costs.