SQE1 Core Principles of Double Entry Bookkeeping and SRA Accounts Rules

This set of vocabulary flashcards covers essential accounting terms and regulatory rules for law firms as required for the SQE1 Assessment Specification.

Double entry bookkeeping

The system of accounting records that law firms must follow to ensure every transaction is recorded in at least the client cash book and the client ledger.

SRA Accounts Rules

Regulations primarily concerned with keeping client money safe and ensuring that proper records are kept by law firms.

Rule $4.1$

The rule stating that client money must be kept separate from the firm’s own money.

Rule $8$

The rule that sets out the recording requirements for the Accounts Rules, including maintaining books in chronological order.

Client money

Money held or received for a client or trust, which must be kept in a separate client bank account.

Business money

The law firm's own money, used for ordinary business dealings and recorded in its own cash account.

Cash account

An account used to record dealings with each bank account; firms typically maintain side-by-side columns for business and client sections.

Ledger account

A record of dealings with money on behalf of a specific client or trust, often showing business and client entries side by side.

DR (Debit) entry in Cash account

The type of entry made to record a receipt of money.

CR (Credit) entry in Cash account

The type of entry made to record a payment of money.

DR (Debit) entry in Ledger account

The entry used to record a payment made on behalf of a client or to show that a client owes the firm money for professional charges and VAT.

CR (Credit) entry in Ledger account

The entry used to record a receipt of money from or on behalf of a client.

Rule $5.3$

The rule prohibiting payment from a client bank account unless the firm holds sufficient funds in that bank account for that specific client.

Professional charges

The fees a solicitor bills to a client for work done, traditionally referred to as 'profit costs'.

HMRC account

The ledger account used to record the amount of VAT the firm owes to His Majesty’s Revenue and Customs.

Disbursements

Costs paid by the firm on a client's behalf, which are recorded as and when they are paid rather than when a bill is sent.

Profit costs account

An income ledger account that shows the total amount the firm has billed for professional charges at the end of the year.

Narrative

The description required alongside accounting entries to identify and provide adequate information about the transaction.