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FLK2 · SQE1 module

Solicitors Accounts

Solicitors Accounts causes disproportionate anxiety relative to its actual scope: a small set of rules about client money, applied consistently to different scenarios.

The single governing idea is separation: client money is not the firm’s money, and the rules exist to enforce that distinction in every transaction.

What this module covers

Every section of Solicitors Accounts, in the order the course teaches them. This is the whole syllabus for the module, not a selection. Open a section to read the topics inside it.

  1. Scope and Application of the SRA Accounts Rules2 topics
    • Who the Rules bind
    • Profit and loss account and balance sheet in context
  2. Definition of Client Money3 topics
    • What client money is
    • Money held as stakeholder
    • What regulated services means
  3. The Client Account1 topic
    • Requirements for a client account
  4. Paying Client Money into the Client Account2 topics
    • The duty to pay in promptly
    • Promptly is not defined
  5. Withdrawals from the Client Account3 topics
    • When a withdrawal is permitted
    • Never more than the funds held
    • Residual balances
  6. Mixed Receipts and Placement of Funds3 topics
    • Allocating a mixed payment
    • Transferring money for costs
    • Business money in a client account
  7. Transfers Between Client Ledgers1 topic
    • Recording an inter-client transfer
  8. Double-Entry Bookkeeping: Cash Account and Client/Business Ledgers3 topics
    • The records the firm must keep
    • Recording a bill
    • Recording an abatement
  9. Reconciliations and Statements1 topic
    • The five-week reconciliation
  10. Breaches and Prompt Correction1 topic
    • Correcting a breach promptly
  11. Interest on Client Money3 topics
    • Accounting for a fair sum of interest
    • General and designated accounts
    • Timing, and the interest ledger
  12. Joint Accounts and Operating a Client's Own Account2 topics
    • Joint accounts
    • Operating a client’s own account
  13. Third-Party Managed Accounts1 topic
    • When such an account may be used
  14. The Accountant's Report and Exemptions3 topics
    • When a report is required
    • The exemption from a report
    • Retention of accounting records
  15. Disbursements and VAT: Agency and Principal Methods3 topics
    • When a payment is a disbursement
    • The agency and principal methods
    • Who can reclaim the input tax
  16. VAT: Rate and Registration Threshold3 topics
    • The standard rate and the threshold
    • A fee quoted silent on tax
    • The rate categories in context
  17. Deposits: Stakeholder or Agent; Acting for Lenders2 topics
    • Stakeholder and agent compared
    • The mortgage advance
  18. Petty Cash1 topic
    • Petty cash is business money

A real question from this module

Answer it before you decide

FLK2 · Solicitors Accounts

Question

A firm receives a single payment from a client. Part of it relates to a bill already delivered for work completed, and the remainder is described by the client as "towards your fees for the next stage", which has not yet been billed or even started. How must the firm treat this payment under the SRA Accounts Rules?

Answer C

Client money includes money received in advance of costs being incurred, even where it is described as being "towards fees", until the firm has actually delivered a bill for that part of the work. The already-billed part may be transferred to the business account, but the unbilled part must be paid into, or kept in, the client account until it is earned and billed. A client’s agreement to be charged in advance does not itself convert an unbilled amount into the firm’s own money, and a mixed payment cannot simply be left to the firm’s choice.

SRA Accounts Rules, client money and the treatment of advance payments for costs.

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