Solicitors Accounts

• Topic 01

  Introduction to Solicitors Accounts

  41 questions
• Topic 02

  Client Money

  48 questions
• Topic 03

  Client Accounts

  33 questions
• Topic 04

  Accounting Procedures and Entries

  38 questions
• Topic 05

  Breaches of the SRA Accounts Rules

  32 questions
• Topic 06

  Record-Keeping Requirements

  36 questions
• Topic 07

  Joint Accounts and Third-Party Managed Accounts

  31 questions
• Topic 08

  Accountants' Reports and Regulatory Compliance

  45 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. A firm receives a single bank transfer of GBP 50,000 from a client. The transfer note says 'GBP 45,000 for completion funds and GBP 5,000 for agreed fees (bill attached)'. The accounts clerk pays the entire GBP 50,000 into the client account. The following day, the error is discovered. Under the SRA Accounts Rules 2019, what is the breach and what corrective action is required?

   • A
     The firm must return the entire GBP 50,000 to the client and request separate payments
   • B
     There is no breach because all money received from a client must be paid into the client account first
   • C
     The GBP 5,000 for billed fees is office money and should have been paid into the office account; the firm must transfer GBP 5,000 from the client account to the office account to correct the error
     Correct answer
   • D
     The entire GBP 50,000 should have been paid into the office account, and the firm must now transfer it all
   Explanation

   The GBP 45,000 for completion funds is client money and correctly goes into the client account. The GBP 5,000 for billed fees (with bill delivered) is office money and should have been paid into the office account. Holding office money in the client account is a breach (though less serious than the reverse). The firm must transfer GBP 5,000 to the office account. There is no requirement to reject mixed payments -- the firm must simply allocate them correctly.

2. A firm's five-weekly reconciliation shows: bank statement GBP 1,000,000; cash book GBP 1,002,500; total of client ledger balances GBP 1,005,000. After investigation, the firm identifies: (i) a GBP 2,500 cheque drawn on the client account that has not yet been presented; (ii) GBP 500 of bank interest not yet recorded in the cash book; and (iii) a GBP 2,000 receipt recorded in a client ledger but not in the cash book. Do these items fully reconcile all three figures?

   • A
     No, after making the adjustments the figures do not fully reconcile and further investigation is needed
     Correct answer
   • B
     Yes, but the firm must also identify and record a GBP 500 bank charge to complete the reconciliation
   • C
     Yes, all three items together account for the GBP 5,000 total discrepancy and no further action is needed
   • D
     No items are valid reconciling items because any discrepancy indicates potential fraud that must be reported to the SRA
   Explanation

   To determine if the items reconcile, we must adjust the figures mathematically:

   1. Bank Statement: GBP 1,000,000. Deducting the unpresented cheque (GBP 2,500) gives an adjusted bank balance of GBP 997,500.
   2. Cash Book: GBP 1,002,500. Adding the unrecorded interest (GBP 500) and unrecorded receipt (GBP 2,000) gives an adjusted cash book of GBP 1,005,000.
   3. Client Ledgers: GBP 1,005,000. Adding the unrecorded interest (GBP 500) brings the adjusted ledgers to GBP 1,005,500. Because the adjusted figures (GBP 997,500 / GBP 1,005,000 / GBP 1,005,500) do not match, the discrepancy is not fully explained and further investigation is required.

3. A firm has a client account titled 'Jones & Partners Solicitors Client Account'. Under Rule 3.2 of the SRA Accounts Rules 2019, does this name satisfy the naming requirement?

   • A
     No, because Rule 3.2 requires the title to state 'SRA Client Account'
   • B
     No, because the account title must include the firm's SRA registration number
   • C
     Yes, but only if the SRA has approved the specific account title in advance
   • D
     Yes, because the account title includes the word 'client'
     Correct answer
   Explanation

   Rule 3.2 requires that a client account includes the word 'client' in its title. 'Jones & Partners Solicitors Client Account' includes the word 'client' and therefore satisfies the requirement. There is no need to include 'trust', the SRA registration number, or 'SRA' in the title, and no prior SRA approval is needed.