Special accounting entries Flashcards
What type of money is a check made out to a third party?
It is not considered client money.
What should a firm do with a check made out to a third party?
Forward the check to the payee without delay and keep a written record on the correspondence file.
What happens when a firm draws against a check that hasn’t cleared, and the check bounces?
This is a breach of Rule 5.3 as it uses money belonging to other clients. The firm must immediately replace the money improperly withdrawn.
How is an abatement (reduction of client costs) recorded?
Reverse entries made when the bill was sent, send the client a VAT credit note, and reduce the output tax charged proportionately.
What happens when a firm writes off a client debt?
The firm loses the amount for profit costs, VAT, and disbursements. They can claim VAT relief after six months.
What type of money is petty cash?
Business money.
How is commission from insurance companies typically handled?
Firms usually account to the client, either by paying it to them, offsetting it against fees, or keeping it with the client’s informed consent.
