Foundations

Question 1

What is client money?

Answer 1

Any money which a solicitor or the firm has control but which does not belong to the firm. It is money held or received on behalf of clients or third parties for the provision of legal services.

Question 2

What are profit costs?

Answer 2

Professional fees or charges.

Question 3

What is double entry book keeping?

Answer 3

For each transaction there is a debit and credit entry kept on two different ledgers.

Question 4

What would be recorded in business columns of a ledger?

Answer 4

Business money paid into or out of the firm’s business account.

Question 5

What would be recorded in the client columns of a ledger?

Answer 5

Client money being paid into or out of the client account, profit and costs, VAT or any client to client transfers.

Question 6

What should the client account balance column always show?

Answer 6

A debit balance as a credit balance would indicate that the account is overdrawn which is a breach of the rules.

Question 7

What should journal entries identify?

Answer 7

• which two ledgers are involved in the transaction;
• whether the transaction relates to client or business money
• which entry is the debit and which is the credit