Accounting for Property Flashcards
ACT FOR BUYER.
1 .Buyer sends deposit to seller for payment out at the appropriate time.
CR Buyer client ledger.
DR client cash.
ACT FOR BUYER.
2. Solicitor sends seller deposit. When does this occur and what are the relevant entries?
On exchange of contracts.
DR Buyer client ledger.
CR client cash.
ACT FOR BUYER.
3. Lender pays mortgage money to solicitor. When does this occur and what are the relevant entries?
Shortly before completion.
1a. CR Lender client ledger and DR client cash.
+
1b. DR Lender client ledger and CR Buyer client ledger
OR
2. CR Buyer client ledger (provided Rule 29.10 satisfied) and DR client cash
ACT FOR BUYER.
3B. Why do you only need to make one double-entry when reallocating money between Lender-client ledger and Buyer client ledger?
You are simply reallocating money you hold in your client account to a different client, rather than transferring money between two cash accounts.
ACT FOR BUYER.
3A. When can mortgage monies provided by a lender be recorded directly in the Buyer-client’s ledger (2 requirements)?
R 29.10 - provided (i) funds belonging to Lender and Buyer are clearly identifiable and (ii) lender is institutional lender whose normal activities include provision of standard term mortgages
ACT FOR BUYER.
4. You send Buyer client a bill of costs. What are the relevant entries?
- DR Buyer client ledger.
2. CR profit costs.
ACT FOR BUYER.
5. You send Lender client a bill of costs. What are the relevant entries.
Buyer client usually pays. So either
1. DR Buyer client ledger and CR profit costs;
or
2a. DR Lender client ledger and CR profit costs
+
2b. CR Lender client ledger and DR Buyer client ledger
ACT FOR BUYER.
6. Buyer sends you completion monies. What does this include, when does this occur and what are the relevant entries?
Includes amount required to settle your bill.
Occurs on receipt of your financial statement/bill of costs.
Entries: CR Buyer-client ledger; DR client cash
ACT FOR BUYER.
7. Pay completion monies to Seller. What does this include, when does this occur and what are the relevant entries?
Includes both mortgage and buyer’s monies.
Occurs on completion.
Entries: DR Buyer-client ledger; CR client cash
ACT FOR BUYER.
8. Settle your bill from Buyer-client cash. What are the relevant entries?
- Funds leave client account: DR Buyer-client ledger; CR client cash
- Funds enter office account: CR office ledger; DR office cash
ACT FOR SELLER
1. Receive deposit from buyer’s solicitor. When does this occur and how is it recorded?
Occurs on exchange of contracts.
- If money held as agent, money belongs to Seller immediately - CR client ledger; DR client cash.
- If money held as stakeholder, solicitor holds money on trust for both buyer and seller - CR stakeholder ledger; DR client cash.
ACT FOR SELLER
What is the difference between receiving deposit as (i) agent or (ii) stakeholder?
(i) Agent = seller owns money immediately and money can be passed to seller even before completion
(ii) Stakeholder = holds the deposit money on
trust for both the buyer and seller, money cannot be handed over to either party until the other consents, or until the sale of the property completes.
ACT FOR SELLER
2. Receive purchase price from Buyer + release deposit previously held as stakeholder. When does this occur and how is it recorded?
Occurs on completion.
- Purchase price = CR client ledger; DR client cash.
- Deposit = DR stakeholder ledger; CR client ledger
ACT FOR SELLER
3. Redeem seller’s mortgage. How is this recorded?
- DR Seller-client ledger; CR client cash.
2. (i) DR Seller-client ledger + CR Lender-client ledger; (ii) DR Lender-client ledger + CR client cash.
ACT FOR SELLER
4. Settle your bill of costs for Seller and Lender. How is this recorded?
Seller usually pays Lender’s costs, so only need to deal with Seller ledger.
- Funds leave client account: DR Seller-client ledger; CR client cash
- Funds enter office account: CR office ledger; DR office cash
