Solicitors Accounts

Question 1

What is client money

Answer 1

Client money is money held or received by afirm (an authorised body but referred to as “you”):
(a) relating to regulated services delivered by you to a client;
(b) on behalf of a third party in relation to regulated services delivered by you (such as money held as agent, stakeholder or held to the sender’s order);
(c) as a trustee or as the holder of a specified office or appointment, such as donee of a power of attorney, Court of Protection deputy or trustee of an occupational pension scheme;
(d) in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the same.

Question 2

What is a client

Answer 2

‘the person for whom you act’ (but see Rule 2.1(b) and (c)above – although this does not include beneficiaries)

Question 3

What are fees

Answer 3

‘your own charges or profit costs (including any VAT element)’.

Question 4

what are disbursements

Answer 4

‘any costs or expenses paid or to be paid to a third party on behalf of the client or trust (including any VAT element) save for office expenses such as postage and courier fees’

Question 5

what are costs

Answer 5

‘fees and disbursements’

Question 6

What is a client account

Answer 6

A separate account that the business puts all money that belongs to clients into

Question 7

What is rule 2.4

Answer 7

Rule 2.4 requires firms to ensure that client money is available on demand unless an alternative arrangement is agreed in writing with the client or the third party for whom the money is held

Question 8

What is rule 3

Answer 8

Rule 3 requires a client account to be at a bank or building society in England and Wales and to include the word ‘client’ in its title to distinguish it from the firm’s own business accounts

Question 9

What is rule 2.3

Answer 9

Rule 2.3 provides that client money must be paid promptly into a client bank account

Question 10

What is the legal aid exception

Answer 10

Firms can take these payments into their own business accounts
Payments may include advance payments for parties (such as counsel) providing professional services to the client. These parties don’t have to be paid within a specified time or for such sums to be transferred to the client account bank if the party providing the professional services is not paid within a specified time
Delay paying may be a breach of the SRA Code of Conduct for Firms for other reasons

Question 11

What is rule 4.1

Answer 11

Rule 4.1 requires client money to be kept separate from the firm’s own money

Question 12

What is rule 4.3

Answer 12

Rule 4.3: Where you are holding client money and some or all of that money will be used to pay your costs:
you must give a bill of costs, or other written notification, to the client or the paying party;
this must be done before you transfer any client money from a client account to make the payment; and
any such payment must be for the specific sum identified in the bill of costs or other written notification and covered by the amount held for the particular client or third party.

Question 13

What is double entry book keeping

Answer 13

Every financial transaction has two aspects to it and both aspects need to be recorded
Each aspect must be recorded in a different account

Question 14

What is DR

Answer 14

DR (debit) – good for the business (debtors of the business)

Question 15

What is CR

Answer 15

CR (credit) – bad for the business (creditors of the business)

Question 16

What is rule 8.2

Answer 16

Rule 8.2: firms must obtain bank statements for all client bank accounts and for the firm’s own business bank accounts at least every five weeks

Question 17

What is rule 8.3

Answer 17

: firms must prepare bank reconciliation statements for the client bank accounts:
Bring cash book up-to-date (e.g. to show unexpected items on the bank statement)
2. The figures on the bank statement must be adjusted to reflect the reality of the situation e.g. unpresented cheques already showing on the cash book

Question 18

What is rule 11.1

Answer 18

Rule 11.1 allows firms to enter an agreement with a client to use a third party managed account (TPMA) to hold client money, rather than operating the firm’s own client bank account.

Question 19

What is rule 12.1

Answer 19

Rule 12.1 provides that firms which have, at any time during an accounting period, held or received client money, or operated a joint account or a client’s own account as signatory, must obtain an accountant’s report for that accounting period within six months of the end of the period