solicitor's account Flashcards
A solicitor received a cheque from a client for £1,000 to be held on account of costs. The solicitor paid a search fee of £200 on behalf of the client. Two days later, the solicitor’s bank informed them that the cheque has been dishonoured.
Which of the following statements is true?
The solicitor must promptly transfer £200 from the business account to the client account to remedy the breach.
A firm must not withdraw more than the money that is held for a client. Doing so is a breach of the SRA Accounts Rules, and as such the firm must promptly, upon discovery, remedy the breach.
A solicitor is attending a property auction representing a client. A week before the auction, the client pays the law firm £250 in cash for auctioneers’ fees, and requests that the solicitor pay the auctioneers’ fees on the day of the auction.
Which of the following statements describes how the solicitor should deal with the receipt of £250 from its client?
The law firm should record the receipt of the money on the client ledger and place the cash in the client bank account. The law firm must treat the cash as client money because it has received the cash a week before the auction fees are due, and the rules require that client money be paid ‘promptly’ into a client account.
A solicitor receives a £1,500 cheque from a client: £200 for payments the firm made to a surveyor, £800 for work done by the firm, and £500 to be used for future expenses incurred on the client’s behalf.
Which of the following statements is correct with regard to the cheque?
The business money element can be paid into the client account but must be moved into the business account promptly.
A solicitor sent his client a bill seven days ago, consisting of £1,500 in Profit Costs, £300 VAT, and £200 for a disbursement that the solicitor has already paid from the business account. The client sends the solicitor a cheque for £2,000. The solicitor records the receipt with a credit entry on the business side of the client’s ledger.
Which one of the following entries would best describe the corresponding entry the solicitor would make to record the receipt?
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Debit Cash Account - Business Side
A firm of solicitors acts for a client in relation to a probate matter. On behalf of the client, the firm pays a bill from a valuation expert of £600 plus £120 VAT. The invoice is addressed to the firm.
Which of the following entries should the firm make with regard to the payment?
Responses
The principal method of payment should be used, as the invoice is addressed to the firm. Therefore, the expense is the firm’s expense and business money must be used. (This is why (A) and (D) are incorrect.) £600 will be debited from the business side of the client’s ledger when the payment is made. The corresponding entries will be recorded on the firm’s cash ledger and VAT ledger. The VAT of £120 will be added to total VAT charged by the firm when it issues its bill of costs to the client.
