SQE1: Transfers and Mixed Receipts

Vocabulary flashcards covering the core principles of double entry bookkeeping and SRA Accounts Rules regarding cash transfers, inter-client transfers, and mixed receipts for SQE1 preparation.

Rule 8.1(a)

The SRA Accounts Rule requiring firms to record on each client's ledger account all client and business money receipts and payments made for that client.

Cash transfer

A transaction where money is withdrawn from the client bank account and paid into the business bank account, such as to pay the firm's professional charges.

Inter-client transfer

A change in ownership where a firm stops holding money for one client and starts holding it for a second client; also known as a 'paper' transfer.

Rule 4.2

The SRA Accounts Rule requiring funds from mixed receipts to be allocated promptly to the correct bank account.

Mixed receipts

Funds received from a client that comprise a mixture of business money and client money.

Rule 5.3

A regulatory rule concerning the replacement of money withdrawn in breach, which may necessitate a cash transfer into the client account.

Split cheque

A method of allocating mixed receipts where the different portions of a single cheque are paid into separate bank accounts (business and client) at the time of deposit.

Business money

The firm's own funds, which include professional charges, VAT, and money received for paid disbursements.

Client money

Funds held by the firm in a client bank account on behalf of a client or trust.

Cash Transfer Accounting (Stage 1)

To record payment from the client bank account: CR Cash account (Client section) and DR Client's ledger account.

Cash Transfer Accounting (Stage 2)

To record receipt into the business bank account: DR Cash account (Business section) and CR Client's ledger account.

Inter-client Transfer Accounting

To record the change in ownership within the client bank account: DR Client ledger account of the first client and CR Client ledger account of the second client.

Direct transfer

The process of paying a mixed receipt into one bank account and then promptly transferring the relevant portion to the correct account.

Paper transfer

A synonym for an inter-client transfer, so called because no money is actually taken out of the client bank account; only internal ledgers are updated.

Paid disbursement

An expense already paid for by the firm using its own money; any funds received to reimburse this are considered business money.

Unpaid disbursement

A cost included on a bill that the firm has not yet paid; these can be transferred from the client account to the business account once the bill is issued.