Miscellaneous matters - chapter 14

receipt of a cheque made out not to the firm but to the client or third party

firm is not the payee and you have not received client money. Your obligation is to forward the cheque to the payee without delay. there is no obligation to record on client ledger/

Dishonoured cheques

Any money improperly withdrawn from a client account must be immediately replaced The firm will have to make good the shortfall by transferring its own money to the client bank account.

Abatements - what is it

clients may complain bill is too high so firm may decide to reduce the costs, HMRC allows output tax charged on bill to be reduced proportionately

how to record an abatement

reverse the entries made on the profit costs and HMRC account when the bill was sent to the extent of the abatement, send the client a Vat credit note

Bad debts

client won’t pay the amount owing to the firm so the firm will have to write off amount owing for its professional charges and VAT and disbursements paid from business bank account

VAT - bad debts

available once the debt has been outstanding for at least 6 months since the date payment was due so solicitor will be entitled to a refund from HMRC

entries for bad debts

need separate entries when the debt is written off and then another when VAT relief becomes available

what is petty cash account for

to meet small cash payments

is petty cash business money

petty cash is business money for if petty cash payments used for clients, the firm has chosen to use business money on behalf of the client

firms offered commission from insurance companies

where firm entitled to retain the commission, the firm will have a commission received account and ledger account in the name of each company paying commission

Code of conduct 5.1

firms must properly account to clients for any financial benefit received as a result of client instructions