Solicitor Accounts

Question 1

How often are periodic statements and reconciliation required?
- Statements obtained from financial institution where client money is held
- Reconciliation of statement balance with the cash book balance and the client ledger total, signed off by COFA or firm manager

Answer 1

At least every 5 weeks

Question 2

Term for account showing a running total of all transactions through client accounts held or operated by the solicitor/firm

Answer 2

Cash book

Question 3

What is the exception in which client account systems and controls do not apply?

Must still obtain statements and keep a record of bills

Answer 3

When money held or received jointly with client and third party

Question 4

How long after the end of the accounting period must the accountant’s report be delivered to the SRA if client money is held or received, or the solicitor operates a joint account or a client’s own account as signatory?

Answer 4

Within 6 months

Question 5

In which 2 cases is an accountant’s report NOT required if client money is held or received, or the solicitor operates a joint account or a client’s own account as signatory?

Answer 5

• All client money held or received during the accounting period is money received from the Legal Aid Agency
• The total balance of all client accounts held or operated during the accounting period does not exceed an average of £10,000 and a maximum of £250,000

Question 6

How long must accounting records be retained for?

Answer 6

At least 6 years

Question 7

Client money must be paid promptly into a client account. Though “promptly” is not defined, what is it likely to mean?

Answer 7

Same or next working day

Question 8

What are the only 3 situations money can be withdrawn from a client account?

Answer 8

• For the purpose for which it is being held
• Following receipt of instruction from the client
• On the SRA’s prior written authorisation

Question 9

What must the firm do if it draws upon a cheque that later dishonoured by the bank?

Answer 9

Immediately transfer the amount by which the client account is overdrawn from the business account to the client account

Question 10

Term for money received by firm which includes funds which belong to the client as well as the firm itself

Answer 10

Mixed receipts

Question 11

What are the following exemptions for
- A solicitor holds the money as trustee and paying the money would conflict with their obligations
- The client money represents payments received from the Legal Aid Agency for the firm’s costs
- An alternative agreement has been agreed in writing with the client or third party for whom the money is held

Answer 11

Paying client money promptly into a client account

Question 12

What are the 2 options for dealing with mixed receipts?

Answer 12

• Split the cheque (rare)
• Deposit in either client or business account and transfer

Question 13

Money received to cover unpaid disbursements should be placed in which account?

Answer 13

Client account

Question 14

Term for transferring money from one client’s account to another’s (e.g. for payment of a debt), also known as paper transfer

Answer 14

Inter-client transfer

Question 15

What is the type of VAT charged by a business to its customers?

Answer 15

Output VAT

Question 16

What is the type of VAT charged to a business by its suppliers?

Answer 16

Input VAT

Question 17

What type of payment?
- Firm paid a supplier on client’s behalf acting as client’s agent
- Client received, used, or benefitted from goods/services paid for by firm on their behalf
- Client was responsible for paying third party
- Client authorised firm to make payment on his behalf
- Client is aware the good/services were from another supplier

Answer 17

Disbursement

Question 18

Which method of invoice treatment is used when an invoice is addressed to a client?

Answer 18

Agency method

Question 19

Which method of invoice treatment is used when an invoice is addressed to a firm?

Answer 19

Principal method

Question 20

Which account will an invoice addressed to the firm for a service carried out for a client be paid from?

Answer 20

Business account

Even if client account has sufficient money

Question 21

What is the process when a firm receives an invoice for client’s counsel fees in the firms name?

Answer 21

Cross out firm’s name and replace with client’s name

Question 22

Which account is used for petty cash payments on behalf of a client?

Answer 22

Business account

Question 23

What amount of interest of client/third party money held by a firm must be accounted to the client/third party?

Answer 23

A fair sum

Question 24

What should be presented to a client at the outset of any transaction reagarding accounting for interest?

Answer 24

Written policy on the payment of interest which seeks to provide a fair outcome

Question 25

Term for policy in which ‘no interest shall be paid on any individual client’s funds where the firm holds less than £20 for them’

Answer 25

De minimis policy