Double Entry Bookkeeping and the SRA Accounts Rules

Practice flashcards covering the core principles of double entry bookkeeping and the Solicitors Regulation Authority (SRA) Accounts Rules for the SQE1 syllabus.

Accounts

The summaries of financial information and day-to-day records which a law firm keeps of its financial transactions.

Bookkeeping

The process of recording financial transactions in the accounts of a firm, historically entered into large bound books.

Double entry bookkeeping system

A system developed by Venetian traders in the $15$th century where every financial transaction has two aspects and both must be recorded in different accounts.

Capital

The liability of a business to repay its proprietor or owner for the cash or funds they put into the business.

Debit (DR)

The label used for the left-hand side of a double entry bookkeeping account.

Credit (CR)

The label used for the right-hand side of a double entry bookkeeping account.

Balance column

A section in the tabular form of accounts showing the running total; it is described as a DR balance if debit entries exceed credit entries.

Profit costs

An income account where charges for professional services are recorded as a credit entry when a bill is issued to a client.

Cash account

Also known as a cash sheet or cash book, it is a record of receipts into and payments out of the bank account, typically handled electronically or by cheque.

Petty cash

A small amount of physical cash kept in the office to cover small, day-to-day expenses, recorded in its own account.

Ledger accounts

The collective term for all the accounts of a business in the bookkeeping system, excluding the cash and petty cash accounts.

SRA Accounts Rules

A principle-based and outcome-focused framework, effective from $25$ November $2019$, designed to keep client money safe and separate from firm money.

Authorised body

A term defined in the SRA Glossary that encompasses most firms of solicitors and sole practitioners authorised by the SRA to carry out legal work.

Rule 1 of the SRA Accounts Rules

The specific rule stating that the SRA Accounts Rules apply to authorised bodies, their managers, and employees.

Weston v The Law Society (1998)

A case where the Court of Appeal confirmed a solicitor could be struck off for breaches of the Rules committed by partners, even if the solicitor was unaware of them and no dishonesty was alleged.

Debit entries (DR)

Recording entries on the left side of accounts to represent expenses incurred, assets acquired or increased, liabilities reduced, or cash gained.

Credit entries (CR)

Recording entries on the right side of accounts to represent income earned, assets disposed of or reduced, liabilities incurred or increased, or cash paid.