Solicitor Accounts Flashcards
complete
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
At least every 5 weeks
Term for account showing a running total of all transactions through client accounts held or operated by the solicitor/firm
Cash book
What is the exception in which client account systems and controls do not apply?
Must still obtain statements and keep a record of bills
When money held or received jointly with client and third party
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?
Within 6 months
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?
- 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
How long must accounting records be retained for?
At least 6 years
Client money must be paid promptly into a client account. Though “promptly” is not defined, what is it likely to mean?
Same or next working day
What are the only 3 situations money can be withdrawn from a client account?
- For the purpose for which it is being held
- Following receipt of instruction from the client
- On the SRA’s prior written authorisation
What must the firm do if it draws upon a cheque that later dishonoured by the bank?
Immediately transfer the amount by which the client account is overdrawn from the business account to the client account
Term for money received by firm which includes funds which belong to the client as well as the firm itself
Mixed receipts
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
Paying client money promptly into a client account
What are the 2 options for dealing with mixed receipts?
- Split the cheque (rare)
- Deposit in either client or business account and transfer
Money received to cover unpaid disbursements should be placed in which account?
Client account
Term for transferring money from one client’s account to another’s (e.g. for payment of a debt), also known as paper transfer
Inter-client transfer
What is the type of VAT charged by a business to its customers?
Output VAT
What is the type of VAT charged to a business by its suppliers?
Input VAT
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
Disbursement
Which method of invoice treatment is used when an invoice is addressed to a client?
Agency method
Which method of invoice treatment is used when an invoice is addressed to a firm?
Principal method
Which account will an invoice addressed to the firm for a service carried out for a client be paid from?
Business account
Even if client account has sufficient money
What is the process when a firm receives an invoice for client’s counsel fees in the firms name?
Cross out firm’s name and replace with client’s name
Which account is used for petty cash payments on behalf of a client?
Business account
What amount of interest of client/third party money held by a firm must be accounted to the client/third party?
A fair sum
What should be presented to a client at the outset of any transaction reagarding accounting for interest?
Written policy on the payment of interest which seeks to provide a fair outcome
