Double entry book keeping and SRA Rules Flashcards
What is the name of the bookkeeping system used by all law firms to record their financial transactions?
The double-entry bookkeeping system.
What two aspects are recorded for every financial transaction in the double-entry bookkeeping system?
Each financial transaction is recorded by noting how the transaction affects the firm’s assets and how it affects the firm’s liabilities.
Which side of an account is used to record an increase in assets or a decrease in liability?
The left side, also called the debit side.
Which side of an account is used to record a decrease in assets or an increase in liability?
The right side, also called the credit side.
What does the “Balance” column in an account show?
The “Balance” column shows the running balance on the account, reflecting the difference between the total debit entries and the total credit entries.
What are the two accounts involved when a law firm issues a bill to a client for professional services?
The two accounts involved are an income account (often called “profit costs”) and a client account in the name of the client.
What is the difference between a “cash account” and “ledger accounts”?
A cash account (or cash book) records all receipts into and payments out of the bank account, including petty cash. Ledger accounts refer to all other accounts used in the bookkeeping system, such as asset accounts, liability accounts, income accounts, and expense accounts.
Who is bound by the SRA Accounts Rules?
The SRA Accounts Rules apply to all law firms authorized by the SRA, including their managers and employees.
What is the main purpose of the SRA Accounts Rules?
The SRA Accounts Rules are designed to ensure that money belonging to clients is kept safe and separate from money belonging to the firm. They aim to reduce the risk of misuse of clients’ funds.
List at least three key principles for keeping client money safe as outlined by the SRA Accounts Rules.
● Keeping client money separate from the firm’s own money.
● Ensuring that client money is returned promptly at the end of a matter.
● Using client money only for its intended purpose.
● Obtaining an annual accountant’s report (proportionate to the firm’s size and risk).
