Solicitors' Accounts
In a property transaction, a client of a solicitor pays £300 in anticipation of search fees. The client makes a direct debit payment over the phone to the solicitor's secretary. However, the secretary hasn't ordered the relevant searches yet.
Which entry would be the most appropriate to record this receipt?
In a property transaction, a client of a solicitor pays £300 in anticipation of search fees. The client makes a direct debit payment over the phone to the solicitor's secretary. However, the secretary hasn't ordered the relevant searches yet.
Which entry would be the most appropriate to record this receipt?
Credit Client ledger - Client Side; Debit Cash Account - Client Side
C) This receipt will remain as client money until the disbursement payment is made, or a bill is raised.
Hence, it should be shown as a credit entry on the client side of the client ledger. The corresponding entry would be a debit on the cash account, client side, as it is the money that the firm owes to the client until the search fees are incurred.
It is important to note that this is not business money as the firm has not incurred the disbursements. Therefore, it should not be shown on the business side of the cash account or client ledger.
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