Solicitor Accounts Flashcards
What is the purpose of Solicitors’ Accounts?
R 1.1 - To keep client money safe, by keeping client money in a separate account from firm money.
Define client money, with 5 examples.
Money held and received for a client, including:
(i) as trustee;
(ii) as agent or stakeholder;
(iii) for payment of disbursements not yet incurred (i.e. before the bill is received)
(iv) for the payment of unpaid professional disbursements (other lawyers or experts); and
(v) on account of costs generally.
What are the 2 rules regarding the payment of client money?
R 14.1 - (i) pay into client account; (ii) without delay
3 exceptions to R. 14.1 where the money comes from the CLIENT?
- Client’s written INSTRUCTIONS to pay the cheque in at a later time
- Where client hands cash to solicitor to pay 3P’S COSTS and solicitor pays out promptly (MUST record receipt and payment in client ledger)
3, Where client sends money for professional disbursement INCURRED but not yet PAID - can pay into office account if paid out within TWO working days
What to do when solicitor receives cheque on behalf of client from 3P payable to the firm (2 points)?
Solicitor can (i) endorse the cheque by making it out in favour of the client and send it on, but (ii) must record the receipt of the cheque as client money
What to do when solicitor receives cheque payable to 3P or the client?
Solicitor must (i) forward it to appropriate recipient (since he cannot cash it) and (ii) make a note in the client ledger to record the receipt and handing over of the cheque
When can client money be placed in office account?
Where client sends money for professional disbursement INCURRED but not yet PAID - can pay into office account if paid out within TWO working days
Otherwise, NEVER
5 situations where permissible to withdraw money from client account (Rule 20)?
- Pay to or on behalf of (including disbursements) client
- Reimburse solicitor for office money spent
- Transfer from one client ledger to another
- Transfer to office account to pay solicitor’s bill of costs
- Client’s written instructions, provided for the client’s convenience
How should a solicitor deal with a mixed cheque? Key distinction?
- Pay the whole sum into the client account and transfer the office money part to the office account within 14 days
- Split the cheque between office and client accounts when cashing it in
Distinction is whether client intends to settle bill of costs (Rule 17.1) or otherwise (Rules 18.2-18.3)
What is “double-entry bookkeeping”? Is it compulsory?
Every entry into an account or ledger requires a corresponding and opposite entry in a different account or ledger - i.e., always recorded twice.
Compulsory pursuant to R. 29.
3 rules of double entry bookkeeping?
- A PAIR of entries in separate ledgers required for every transaction.
- One entry must be a CR; the other a DR.
- But both entries must be on the SAME SIDE of the ledger - either client, or office side.
Four essential pieces of information for an account or ledger entry?
- Date
- Details - (i) which ledger and (ii) description
- Sum and whether CR or DR
- New account balance and whether is CR or DR balance
What is the difference between a client account and a client ledger?
Client account = an actual bank account where client money is kept
Client ledger - bookkeeping record of to whom money belongs, and you need one ledger for each individual client to state how much cash in the main client account is held for each client
What entries do you make when a client sends you a cheque on account of general costs?
- CR client ledger (you hold more $$ for that client).
2. DR client cash (client account owes client $$).
What entries do you make when money is paid out of the client account (e.g. a disbursement paid on client’s behalf)?
- DR client ledger (you hold less $$ for client)
2. CR client cash (client owes client account less $$)
