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Solicitor's Accounts - double entry???

Solicitor's Accounts - double entry???

Hi all,

can someone pls give me an overview of the basic double entry transactions involved with regards to a client's account.... i'm AAT qualified and have been doing bookkeeping for several years and my employer now wants to train me up in this area as well, he will be sending me on a specialist course soon but has advised me to start doing research before hand as part of the professional development etc... so i've had a look around and am trying to make sense of things, i have done 3-way reconciliations etc. and am aware of the client and office accounts as well... i'm just having trouble trying to put things into perspective as far as the double entry is concerned...and he has also told me to read through the Solicitor's Accounts Rules latest version, so that is something i am doing but in order to understand the handbook i need to have the fundamentals sorted first...

Scenario:

A client, Mr. Dean pays WK Solicitors £57,000 for his case....

WK Solicitors incur expenses on behalf of the client, and the money goes out from the client account... are these known as disbursements? these amount to £12,000, i am also aware that some transactions of this sort are settled via the office account, so they would transfer £12,000 from client to office a/c and pay the disbursement on behalf of the client in that way

WK Solicitors also have fees of £32,500 for the case

 i know that there comes a point where a bill is raised to account for the above....

What would be the double entry for all this please? i've tried to come up with a solution but it doesn't make sense.... i'll continue researching and trying to come up with the answers but in the meantime will definitely appreciate any input from more experienced members on this site.... i know that they will go through this on the course, but that is months away and to be honest i would like to go in having at least the basics covered.... many thanks for your help!!

p.s. i've had a look through this site and have printed out the questions/answers related to this topic as well... however, they are not specifically relevant to my query...

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27th Feb 2013 15:38

 

 

For solicitors client money accounting you need to consider that the individual client ledgers are not part of the double entry posting but are in fact memo accounts that require a separate posting (although with solicitors accounting software this is done automatically)

The entries below in italics relate to the client ledger and client office ledger postings.  VAT has been ignored throughout.

For the £57k received the double entry would be DR Client bank £57k, CR Client control account £57k.  Then a separate entry to CR client ledger £57k (there is no matching DR entry for this).

 

If the £12k disbursement was paid from the client bank then

Dr Client control £12k, CR client bank £12k.  Dr client ledger £12K

 

If £12k disbursement was paid from office bank then money transferred from client account

DR Disbursement control £12k, CR office bank £12k.  DR client office ledger £12k

DR Client bank £12k, CR disbursement control £12k.  DR client ledger £12k, CR client office ledger £12k

DR office bank £12k, CR Client control £12k

When the invoice for fees is raised

DR Trade debtors £32,500 CR Sales £32,500.  DR client office ledger £32,500

If paid from client money

DR office bank £32,500  CR Trade debtors £32,500 

DR client control £32,500  CR client bank £32,500 .  CR client office ledger £32,500  DR client ledger £32,500

 

Hope this helps.

 

Anna

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By AH773
28th Feb 2013 16:43

Thanks, but just a few more queries...?

A Chandley wrote:

 

 

If £12k disbursement was paid from office bank then money transferred from client account

DR Disbursement control £12k, CR office bank £12k.  DR client office ledger £12k

DR Client bank £12k, CR disbursement control £12k.  DR client ledger £12k, CR client office ledger £12k

DR office bank £12k, CR Client control £12k

 

Thanks very much for your help Anna, however, i'm having trouble understanding this section of your response; pls see the breakdown with my queries in bold next to your original answer below:

 

DR Disbursement control £12k, CR office bank £12k. DR client office ledger £12k - makes sense

DR Client bank £12k, CR disbursement control £12k. DR client ledger £12k, CR client office ledger £12k: I don't understand this part... shouldn't it have been as follows: DR Client Control £12K : CR Disbursement Control £12K, the memo accounts are understandable no problems there

DR office bank £12k, CR Client control £12k - again, shouldn't it be DR Office Bank £12K and CR Client Bank £12K because we are transferring money from the client account into office account??

 

Thanks

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01st Mar 2013 10:43

Mistake in original post

AH773 wrote:

Thanks very much for your help Anna, however, i'm having trouble understanding this section of your response; pls see the breakdown with my queries in bold next to your original answer below:

 

DR Disbursement control £12k, CR office bank £12k. DR client office ledger £12k - makes sense

DR Client bank £12k, CR disbursement control £12k. DR client ledger £12k, CR client office ledger £12k: I don't understand this part... shouldn't it have been as follows: DR Client Control £12K : CR Disbursement Control £12K, the memo accounts are understandable no problems there

DR office bank £12k, CR Client control £12k - again, shouldn't it be DR Office Bank £12K and CR Client Bank £12K because we are transferring money from the client account into office account??

 

Thanks

The reason you don't understand my journals is because they are wrong.  As you have correctly said it should be

DR Client control £12k CR Disbursement control £12k

DR Office bank £12k  CR Client Bank £12k

 

Sorry for the confusion.

 

Anna

 

 

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27th Feb 2013 16:41

wow, talk about in at the deep end

Hi @AH, I assume you are working for a solicitor now?

Not wishing to put you off or quash you enthusiasm to learn, this is really a difficult area to get to grips with from scratch. I do hope you have a more senior college to work with?

The SAR are so prescriptive and detailed - what can and can’t be taken from a client monies, and the time scale for doing this etc etc - that I don’t think it’s fair to expect anyone to know it all within a few months.

The risk of getting anything wrong is that a breach occurs and the annual Accountants Report is qualified.

First thing I would suggest is invest in good solicitors accounts software. But even then you need to know the basics and what you can and can’t do.

Using your above example ijust highlights the potential problems. Some disbursements can be paid out of client account some out of office. If client money is used to pay bills, again there are different rules including when this transfer should be made.

My suggestion would be to invest in good training and software; To your bosses my advice would be this is the one area you can’t cut corners on.

Hope this helps

 

 

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By angel
28th Feb 2013 00:23

Practical experience
Hi I've done solicitors accounts for the past 16 years if you need any advise feel free to message me:) it's all about the systems in place once that's sorted it's a doddle:).

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03rd Nov 2015 21:15

Solicitors accounts
Hi Angel
Are you still on this site & if so are you still helping others to understand the above

Regards

Hunter

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By AH773
13th Mar 2013 11:29

Great!

Thanks a lot for the clarification 

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By manu73
03rd Dec 2015 11:45

I am trying to to understand how doouble entry will be applicable in this scenario.

I have 2 Bank accounts.One Office account and one Business Client account this all set on VT software.

My question is  if money is transfer from Business to Office account VT software does transfer entries only.DR: Bus Bank CR: Office Bank account.......now next how this entries will be treated in its final income  in VT software.I tried several attempt but does not bring double entry.Especially the credit office bank account has to have DR to balance off.Please help .

 

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