Solicitors accounts

Question 1

What is a disbursement?

Answer 1

When a firm pays expenses on behalf of a client for goods received by the client or services provided to the client
not part of solicitor’s supply of services to the client so the cost is passed to the client and not charged to VAT

Question 2

What is the agency method?

Answer 2

invoice addressed to client - supply treated as made to the client
firm pays the entire amount (including VAT) from client or business account

debit credit ledge client account
credit cash sheet client account

Question 3

What is the principal method?

Answer 3

invoice addressed to the firm–>must use business money
then results service to client at same price

debit client ledger business account - credit cash sheet business account (amount without VAT)
debit HMRC/VAT ledger business account - credit cash sheet business account (VAT amount)

Question 4

is money received by sol on behalf of a 3rd party to be held as stakeholder client or business money?

Answer 4

client money

Question 5

is money received by solicitor as a payment for fees before bill has been delivered client or business money?

Answer 5

client