Notes from BPP's SA module covering:
- Rules regarding client money and office money
- Entries (CR+DR) for every single transaction (from basic to property)
/!/ These notes have been restructured to optimise exam performance and thus are in table formats /!/
/!/ These notes were written ...
MCQ – 14 marks
o Financial statements
o Identifying the correct ledger entries
o SRA Account Rules
!/! common MCQ errors:
Common error Sample error Sample right
Not completing the Details correctly “Cheque from client – money on account of costs” “Client cash (Money on account of costs generally)
No CR or DR in the balance column “7,000” “7,000 DR”
Paying disbursements out of office when there is money in Client
Cash
Solicitors’ bill of costs to bank (to be paid by client) separates out “Our fees for acting for [BANK NAME]. X” “Our fees for acting for [BANK NAME] (inclusive of VAT). X”
VAT on the financial statement (when it shouldn’t)
“VAT on our fees for acting for [BANK NAME]. X”
Long form questions – 56 marks
o Won’t be filling in ledgers as such
o Will be describing transactions
In the exam, you do not need to write out ledgers. You have to do a more simplified version of ledger entries.
!/! if no ledger entry is required, write the transaction number and then “No entries required” underneath
Introductory remarks
Rule 4.1: a firm must keep ‘client money’ separate form money belonging to” the firm, i.e., office money.
!/! in an LLP, liability for compliance with the SRA Account Rules lies with the members (not the employees!) – Rule 1.2.
!/!: the rules don’t distinguish between receiving cash, cheques or bank transfers, so if a client gives you money in cash, you must treat it in the same way as a cheque.
Two bank accounts for two different types of money
This results in the firm having two bank accounts holding two different types of money.
Any transactions relating to office money or client money are recorded chronologically in bank account ledgers which operate on the double entry bookkeeping principle.
What is client money/ Client money is money held or received by the firm: Rule 2.1 Office money is ‘non-client’ money or money belonging to the firm – not defined.
office money? (a) Relating to legal services delivered by the firm to the client
(b) On behalf of a third party in relation to legal services delivered by you
(c) As a trustee or holder of a specified office or appointment, i.e., donee, PoA,
Court of Protection deputy or trustee of an OPS
(d) Fees and unpaid disbursements if held or received prior to delivery of a bill for
the same.
!/! if the disbursement had been paid by the firm, the money received would
not be client money but office money.
e.g., money held on ‘account of costs’, money received in respect of unpaid
costs/expenses (SDLT, LR fees, court fees, etc), client damages received by the firm in a
matter, mortgage money received from a lender (third party) on behalf of the client,
money held to pay nursing home fees for a client where a solicitor has been appointment
CoP, money for the firm’s fees received before a bill has been sent
Rule 3.2. the name of the client account has to include the name of the law firm and have
the word “client” in it to distinguish it from any other bank account held at the law firm.
No equivalent of Rule 3.2. relating to the naming of the office account.
Where are transactions Transactions relating to client money go into the client cash ledger Transactions relating to the office money go into the office cash ledger
relating to client money/
office money recorded?
(+ each individual client’s client ledger – client side) (+ each individual client’s client ledger – office side)
In practice the two ledgers are combined into one ledger, even though they represent transactions that go through entirely different accounts.
The entries in the ledgers should reflect exactly what is in the bank statement!
Bank Accounts
Office cash Client cash
Date Details DR CR Bal DR CR Bal
£ £ £ £ £ £
When should money be Money should be paid into the client account if it is: Money should be paid into the office account if it is:
paid into the client/office Money held as a trustee of the holder of a specified office or appointment, i.e., Money sent after the firm has paid for costs/ expenses (even if no bill delivered)
account? donee of a PoA, Court of Protection deputy, trustee of an OPS
Money sent after a bill for the law firm’s fees has been delivered
Money represents payments from the LAA from your fees an disbursements
Money sent after a bill for unpaid costs and expenses has been delivered
You agree in the individual circumstances an alternative arrangement
When can you pay office When the firm receives a ‘mixed payment’ including both client money and office money.
money into the client
account?
Sometimes a client may send money to pay a bill for work done (office account) but also
some money to pay for a new matter (client account).
If the money is sent to the office account – the client money element must be
allocated to the client account promptly
If the money is sent to the client account – the firm must allocate the office
money element to the office account promptly.
When can you pay money Rule 5.1: only when:
out of the client account? Paying a court fee on behalf of the client
Following instructions from the client or from the third party from whom the
money is held
!/! if a client wants to
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller GCdoestheLPCatBPP. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.89. You're not tied to anything after your purchase.
