Mortgage Accounting Entries for Property Transactions Flashcards
What are the correct double-entry bookkeeping entries for receipt of mortgage funds into the client account (no separate lender ledger)?
A. Debit client ledger (buyer), Credit cash sheet
B. Credit client ledger (buyer), Debit cash sheet
C. Debit client ledger (lender), Credit business account
D. Credit client ledger (lender), Debit cash sheet
B. Credit client ledger (buyer), Debit cash sheet
Explanation: Money into client account = Debit cash sheet; client is buyer = Credit buyer’s ledger.
What entries are used to redeem the seller’s mortgage where no separate ledger is opened for the lender?
A. Debit client ledger (seller), Credit cash sheet
B. Credit client ledger (seller), Debit cash sheet
C. Debit cash sheet, Credit client ledger (lender)
D. Credit client ledger (lender), Debit client ledger (seller)
A. Debit client ledger (seller), Credit cash sheet
Explanation: Money is leaving client account = Credit cash sheet; client money is reducing = Debit seller’s ledger.
When a solicitor opens a separate ledger for the lender, what is the initial entry when mortgage funds are received?
A. Debit lender ledger, Credit cash sheet
B. Debit cash sheet, Credit lender ledger
C. Debit buyer ledger, Credit cash sheet
D. Credit buyer ledger, Debit lender ledger
B. Debit cash sheet, Credit lender ledger
Explanation: Funds into the account = Debit cash sheet. Lender is the client, so Credit their ledger.
Which of the following is NOT considered client money under the SRA Accounts Rules?
A. Mortgage advance received from a bank
B. Redemption proceeds to pay off a lender
C. Costs invoiced to the client by the solicitor
D. Money paid by a buyer for completion
C. Costs invoiced to the client by the solicitor
Explanation: This is business money (non-client), not held on behalf of a client.
A solicitor is acting for both Alex (buyer) and Castle Bank (lender). The solicitor has separate ledgers. After receiving £300,000 from Castle Bank, they now need to transfer this to Alex’s ledger. What are the entries?
A. Debit Castle Bank ledger, Credit Alex ledger
B. Debit Alex ledger, Credit Castle Bank ledger
C. Credit Castle Bank ledger, Credit cash sheet
D. Debit cash sheet, Credit Alex ledger
A. Debit Castle Bank ledger, Credit Alex ledger
Explanation: Transfer between clients = Debit from lender ledger, Credit buyer ledger.
A solicitor receives £200,000 in mortgage funds from City Bank for their client, Leila. No separate lender ledger is used. What entries should be made?
A. Debit client ledger (Leila), Credit cash sheet
B. Debit business ledger, Credit client ledger
C. Debit cash sheet, Credit client ledger (Leila)
D. Debit cash sheet, Credit lender ledger
C. Debit cash sheet, Credit client ledger (Leila)
Explanation: Receipt of client money = Debit cash sheet; since no lender ledger, Leila’s ledger gets credited.
Amira sells her house and her solicitor is redeeming a mortgage of £80,000. A separate ledger is opened for the lender. What are the entries when funds are transferred to the lender ledger?
A. Debit lender ledger, Credit seller ledger
B. Credit lender ledger, Debit seller ledger
C. Debit seller ledger, Credit lender ledger
D. Credit cash sheet, Debit seller ledger
C. Debit seller ledger, Credit lender ledger
Explanation: Transferring client money from one client to another – debit seller, credit lender.
Which of the following client ledger entries suggests client money has been paid out?
A. Credit ledger, Credit cash sheet
B. Debit ledger, Credit cash sheet
C. Debit ledger, Debit cash sheet
D. Credit ledger, Debit cash sheet
B. Debit ledger, Credit cash sheet
Explanation: Payment out = Credit cash sheet (money leaving), and reduce client’s balance = Debit ledger.
Which of the following entries is required to reflect a private loan from one client to another?
A. Debit borrower’s ledger, Credit lender’s ledger
B. Debit lender’s ledger, Credit borrower’s ledger
C. Debit business account, Credit both ledgers
D. Credit lender’s ledger, Credit borrower’s ledger
B. Debit lender’s ledger, Credit borrower’s ledger
Explanation: Money moving between clients – reduce lender balance = Debit, increase borrower balance = Credit.
A solicitor forgets to record the redemption of a seller’s mortgage and only makes an entry in the cash sheet. What is the main risk?
A. Duplication of client entries
B. Disciplinary action for overbilling
C. Breach of Rule 8.1 for not updating client ledger
D. No breach if the client was informed
C. Breach of Rule 8.1 for not updating client ledger
Explanation: Both cash sheet and client ledger must be updated for all client money – failure to do so is a regulatory breach.
A lender sends £250,000 to a solicitor who is acting for both buyer and lender. No lender ledger is opened. What should the narrative in the buyer’s ledger entry indicate?
A. “Funds received – client savings”
B. “Funds received – seller advance”
C. “Mortgage funds received from lender”
D. “Lender funds - solicitor disbursement”
C. “Mortgage funds received from lender”
Explanation: Even though no separate lender ledger is opened, Rule 8.1 requires narrative showing source of funds.
On completion, £315,000 is received from the lender and £35,000 from the buyer. What should be the total credited to the buyer’s client ledger (assuming no separate lender ledger)?
A. £315,000
B. £35,000
C. £350,000
D. £385,000
C. £350,000
Explanation: All client money received for the buyer goes into the buyer’s ledger – lender’s advance and buyer’s deposit total £350,000.
