Double-Entry Bookkeeping - Property Transactions

Question 1

What is meant if a deposit is held by solicitors as stakeholder?

Answer 1

The solicitor holds the deposit on a kind of trust for both the buyer and seller until it is clear whom it should be paid to

Question 2

What is meant if a deposit is held by solicitors as agent?

Answer 2

The solicitor holds for the seller and can hand the deposit over to the seller before completion.

Question 3

What pair of entries is required for deposit monies received by a buyer’s solicitor from buyer?

Answer 3

• credit client ledger client account
• debit cash sheet client account

Question 4

What pair of entries is required for deposit monies paid out by buyer’s solicitor to seller’s solicitor?

Answer 4

• debit client ledger client account
• credit cash sheet client account

Question 5

What entries are required for receipt of deposit monies by seller’s solicitor to be held as stakeholder?

Answer 5

At exchange (when deposit is received):

• credit stakeholder ledger
• debit cash sheet client account

At completion (when deposit money belongs to the seller):

• debit stakeholder ledger
• credit client ledger client account for client

Question 6

What entries are required for receipt of deposit monies by seller’s solicitor to be held as agent?

Answer 6

• credit client client ledger account
• debit cash sheet client account

Question 7

What entries are required for payment of mortgage monies to the borrower?

Answer 7

EITHER

Solicitor records lender’s transactions in the buyer’s client ledger:

• credit client ledger client account for client
• debit cash sheet client account

OR

Solicitor has separate client ledger for the lender:

• first (i) credit client ledger client account for lender client (ii) debit cash sheet client account
• then when money is transferred from lender to buyer (i)debit client ledger account for lender and (ii) credit client ledger account for buyer client

Question 8

What entries are required for payment of redemption monies to lender?

Answer 8

EITHER

Solicitor records lender’s transactions in the buyer’s client ledger:

• debit client ledger client account for client
• credit cash sheet client account

OR

Solicitor has separate client ledger for the lender:

• first - (i) debit client ledger client account for client then (ii) credit client ledger account for lender client
• then (i) debit client ledger client account for lender client then (ii) credit cash sheet client account