Client Money & Solicitors Accounts Flashcards
According to Rule 2.1 of the SRA Accounts Rules, which of the following qualifies as client money?
A) Money held in a solicitor’s personal account
B) Money received in advance for legal fees before a bill is issued
C) Money received after a bill has been issued
D) Money received from a client for office expenses
B) Money received in advance for legal fees before a bill is issued
What does Rule 8.1 require an authorised body (e.g., a law firm) to maintain?
A) Only client money receipts and payments
B) Records of client money, non-client money, bills of costs, and all transactions through the client account
C) Only payments related to regulated services
D) Only records of payments above £10,000
B) Records of client money, non-client money, bills of costs, and all transactions through the client account
In the double-entry bookkeeping system, how is each transaction recorded?
A) Only as a credit entry
B) Only as a debit entry
C) As a matching debit and credit entry in different accounts
D) As an expense in the office ledger
C) As a matching debit and credit entry in different accounts
According to Rule 3.1, where must a solicitor maintain a client account?
A) In any international bank
B) In any bank located within the UK
C) In a bank or building society branch (or head office) in England and Wales
D) In a personal savings account
C) In a bank or building society branch (or head office) in England and Wales
Under Rule 3.2, what must the name of a client account include?
A) The solicitor’s initials and firm name
B) The word “trust” and the name of the firm
C) The name of the authorised body and the word “client”
D) The name of the firm and the firm’s registration number
C) The name of the authorised body and the word “client”
According to Rule 3.3, can a solicitor use a client account to provide banking facilities to clients or third parties?
A) Yes, if requested by the client
B) Yes, if the money is held for more than six months
C) No, unless it is for a regulated service
D) No, under any circumstances
C) No, unless it is for a regulated service
What does Rule 4.1 require solicitors to do with client money?
A) Mix it with the firm’s business funds
B) Keep it separate from money belonging to the authorised body
C) Use it for business expenses before issuing a bill
D) Store it in a general business account
B) Keep it separate from money belonging to the authorised body
What must a solicitor do if they receive a mixed payment (client money and firm’s money together)?
A) Allocate the funds promptly to the correct client account or business account
B) Deposit all funds into the business account first
C) Return the mixed payment to the sender
D) Hold the funds in cash until allocation is confirmed
A) Allocate the funds promptly to the correct client account or business account
What must a solicitor do before transferring client money to pay legal costs?
A) Obtain verbal consent from the client
B) Issue a bill of costs or a written notification of the costs incurred
C) Wait until the case is concluded
D) Transfer the money without client notification if the funds are sufficient
B) Issue a bill of costs or a written notification of the costs incurred
According to the SRA Rules, how must law firms handle client and business funds?
A) Mix them for ease of accounting
B) Keep them in the same account but with separate records
C) Keep them completely separate, using a client account and a business account
D) Transfer client money to the business account after three months
C) Keep them completely separate, using a client account and a business account
What does double-entry bookkeeping ensure?
A) Each transaction has a corresponding debit and credit entry in different accounts
B) Each transaction is recorded once in a general ledger
C) Transactions are only recorded when money leaves an account
D) Solicitors only record transactions over £1,000
A) Each transaction has a corresponding debit and credit entry in different accounts
What happens when a solicitor receives client money, such as an advance payment?
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the client account
B) A debit (DR) entry is made in both the client ledger and client account
C) A credit (CR) entry is made in both the client ledger and client account
D) The money is directly transferred to the business account
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the client account
What happens when client money is paid out, such as for legal fees or returning unused funds?
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the client account
B) A credit (CR) entry is made in both the client ledger and client account
C) The solicitor makes a direct transfer to the firm’s business account
D) The money is moved to petty cash before being transferred
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the client account
What happens when non-client money, such as a bill payment, is received?
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the business account
B) A debit (DR) entry is made in both the client ledger and business account
C) A credit (CR) entry is made in both the client ledger and business account
D) The money must be deposited in the client account first
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the business account
What happens when non-client money is paid out, such as covering costs for a client?
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the business account
B) A credit (CR) entry is made in both the client ledger and business account
C) The solicitor must use client funds instead
D) The money must be taken from petty cash
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the business account
What must a solicitor do if they receive a cheque payable to a client?
A) Deposit it into the firm’s client account
B) Return it to the sender immediately
C) Forward it to the client and record it in their ledger
D) Cash it and keep the funds until the client requests them
C) Forward it to the client and record it in their ledger
When a law firm pays a minor expense (e.g., a taxi) for a client using petty cash, what happens?
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the petty cash record
B) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the petty cash record
C) The firm must reimburse itself from the client account immediately
D) No record is required for minor expenses
A) A debit (DR) entry is made in the client ledger, and a credit (CR) entry is made in the petty cash record
What happens when a client reimburses the law firm for a petty cash expense?
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the business account
B) The money is transferred to the firm’s general fund
C) No record is required, as petty cash transactions are informal
D) The reimbursement must be deposited into the client account
A) A credit (CR) entry is made in the client ledger, and a debit (DR) entry is made in the business account
