Interest

Question 1

What type of money is interest earned by the firm in respect of money held in the client account?

Answer 1

This is not client money. The firm should ask their bank to pay the interest into the business account not the client account. This is because only client money should be held in the client account

Question 2

What happens if interest is payable to the client?

Answer 2

If interest is payable to a client then that interest will need to be withdrawn from the business cash account and then paid into the client cash account

Question 3

What to do with interest earned on client money in a separate designated client deposit bank account?

Answer 3

Must be recorded on the client’s ledger account

Question 4

What is interest is incurred on money held in a general client account

Answer 4

The interest payment is an expense of the business and will be recorded on an interest payable ledger account.
DR interest payable ledger account - business
CR client - business