Introduction to Solicitors' Accounts

Question 1

What is client money?

Answer 1

Money held or received for a client or as a trustee plus all other money which is not business money

Question 2

What is business money?

Answer 2

Money which belongs to the solicitor/practice

Question 3

Is money received by a solicitor on behalf of a third party to be held as stakeholder client or business money?

Answer 3

Client money

Question 4

Is money received by a solicitor as payment for fees that are received before a bill has been delivered client or business money?

Answer 4

Client money

Question 5

All client money can be kept in the same bank ______, but the solicitor must maintain a list of _______ for each client in a client ______

Answer 5

account, balances, ledger

Question 6

How often must firms reconcile client accounts against bank statements?

Answer 6

At least once every 5 weeks

Question 7

How quickly must a firm pay in client money into the client account?

Answer 7

Promptly

Question 8

When does a debit entry into the cash account occur?

Answer 8

When there is a receipt of money into the client account

Question 9

What would be a corresponding entry for a debit entry into the cash account?

Answer 9

Credit entry in the client ledger

Question 10

When does a credit entry in the cash account occur?

Answer 10

When there’s been a payment of money from the client account

Question 11

What would be a corresponding entry for a credit entry into the cash account?

Answer 11

Debit entry in the client ledger

Question 12

What are profit costs?

Answer 12

The costs of the solicitor’s time billed to the client with VAT

Question 13

When a firm bills a client for profit costs, it will:

1. _____ the _____ ledger in the _______ account and
2. ______ the ______ _____ ledger in the same account

Answer 13

1. debit, client, business
2. credit, profit costs

Question 14

When a client pays a bill for profit costs, the entire sum is credited to the ________ side of the _____ ledger and debited to the ________ side of the ____ _______ ledger.

Answer 14

business, client, business, cash account

Question 15

What are costs paid on account?

Answer 15

Money the client gave the solicitor to apply to future costs

Question 16

What must a solicitor do if they inadvertently pay out more than is in a client’s account?

Answer 16

They must make up the shortfall with their own funds

Question 17

If a client disputes a bill and a solicitor agrees to reduce the bill, the solicitor will:

1. debit the _____ ____ account in the ______ side for the amount of the reduction and
2. credit the ________ ledger in the same side

Answer 17

1. profit costs, business
2. client