Misc Flashcards
What is the cash sheet?
The cash sheet records payments/receipts of both business and client money.
The transactions do not often involve physical cash, but more usually money transferred by bank transfers or by cheque.
What are the correct journal entries for a receipt of client money?
CR client ledger account; and DR cash sheet client account.
Receipts of money to be paid into business account - e.g:
-money received in payment for costs and disbursements following delivery of a bill
-money received for paid disbursements, even before delivery of a bill
Client money to be paid into client account - e.g:
-money held on behalf of a client relating to legal services - e.g. proceeds of sale from a conveyancing transaction;
-money held on behalf of a third party relating to legal services provided to a client - e.g. mortgage advice;
-money held by a solicitor in a specified role - e.g. as a trustee;
-money received on account of fees and unpaid disbursements prior to delivery of a bill
What are the accounting entries for a receipt of business money?
-CR client ledger business account
-DR cash sheet business account
Business money to be paid from business account - e.g:
Payments of disbursements using the principal method.
DR client ledger business account
CR cash sheet business account
Client money to be paid from client account - e.g:
Payments relating to legal services, e.g. transfer of completion monies in a property purchase; or payment of gifts, legacies and residue to beneficiaries in a probate matter.
Payments of disbursements using the agency method.
-DR client ledger client account
-CR cash sheet client account
Rule 6.1 - when must breaches of the Rules be corrected?
-any breaches of the Rules must be corrected promptly upon discovery;
-if the breach relates to money that has been improperly withheld/withdrawn from a client account, the breach must be remedied immediately by paying in/replacing money in the client account.
What is the profit costs ledger?
The profit costs ledger is a record of all bills submitted by the firm. The managers of the firm will check this ledger regularly to see how much has been billed by the fee earners in any given period.
What is the profit costs ledger?
The profit costs ledger is a record of all bills submitted by the firm. The managers of the firm will check this ledger regularly to see how much has been billed by the fee earners in any given period.
What is the HMRC-VAT ledger?
A record of all the output VAT that the firm has charged when providing legal services to clients and a record of all the input VAT that the firm has paid when buying the goods/services it needs to run the business.
What are the correct accounting entries required to record the submission of a bill to a client?
- DR client ledger business account and CR profit costs ledger (for the profit costs element of the bill); and
- DR client ledger business account and CR HMRC-VAT ledger (for the VAT element of the bill).
There should be no mention of the cash sheet.
Reducing a bill - abatements. What are the correct accounting entries for abatement of a bill?
- CR client ledger business account and DR profit costs ledger (for the abatement of the profit costs element of the bill);
- CR client ledger business account and DR HMRC-VAT ledger (for the abatement of the VAT element or the bill).
A firm of solicitors bills a client. What accounting entries are required to record the receipt of the client’s payment to clear the bill?
Credit client ledger business account and debit cash sheet business account.
What is the VAT registration threshold?
All businesses must be registered for VAT if their turnover exceeds the VAT registration threshold (currently £85,000 per year) but can choose to be registered for VAT if their turnover falls below this threshold.
