Double Entry Book Keeping and the SRA Accounts Rules

Question 1

Explain the principle of double entry.

Answer 1

• Refers to the fact that an expense/ transaction will have tow effect.
• Eg if a firm buys a property, their cash will decrease, but they gain an asset. Both sides of the transaction therefore need to be recorded and accounted for

Question 2

List what goes in the left hand column of the accounts.

Answer 2

• Expenses incurred;
• Cash gained;
• Liability reduced/ extinguished;
• Asset acquired/ increased

Question 3

List what goes in the right hand column of the accounts.

Answer 3

• Income earned;
• Asset disposed of/ reduced
• Liability incurred/increased;
• Cash paid.

Question 4

What are the two labels used for each side of the accounts?

Answer 4

Credit and Debit.

Question 5

What is entered in the date column of the accounts?

Answer 5

The date of the transaction.

Question 6

What is entered in the details column of the accounts? 1

Answer 6

A brief description of the transaction as well as where the there part of the double entry is made.

Question 6

What does the balance column show?

Answer 6

The running balance on the account.

Question 7

Where is the amount of the transaction entered in the accounts?

Answer 7

In the DR (debit) or CR (credit) section accordingly (dependent on what the transaction is).

Question 8

What happens if the CR entries exceed the DR entries?

Answer 8

The account balance is described as a CR (credit) balance.

Question 8

What happens if the DR entries exceed the CR entries?

Answer 8

The balance is described as a DR (debit) balance.

Question 9

what are the 5 sections (columns) contained in a set of accounts?

Answer 9

• Date;
• Details;
• DR (debit);
• CR (credit);
• Balance.

Question 10

When a bill is issued to a client by a solicitor, how is this recorded in the solicitor’s accounts?

Answer 10

• Charge for the service (ie the value of the bill) is added to the income account as a CR entry.
• The debt owed by the client to the solicitor’s firm is recorded as a DR entry on an account in the name of the client.

Question 11

List the main 4 accounts rules which the SRA released in November 2019.

Answer 11

1) Keeping client money septette from firm’s own money (ie client and business accounts);
2) Ensuring client money is returned promptly at the end of a matter;
3) Using client money only for its intended purpose;
4) Proportionate requirements for firms to obtain an annual accountant’s report.

Question 12

If a firm pays £1,000 for electricity, and 2million for an office premises, how should these entries be made?

Answer 12

In the cash account in the CR column.