Solicitors Accounts
Solicitors Accounts is one of the most technical SQE1 topics, requiring precise knowledge of the SRA Accounts Rules 2019. Questions typically involve categorising money as client money or own money, identifying the correct accounting treatment, and spotting breaches of the rules. You need to be comfortable with ledger entries (though SQE1 tests knowledge, not the mechanics of double-entry bookkeeping).
Practise Solicitors Accounts questions →What FLK2 tests in Solicitors Accounts
Client Money and Office Money
Client money: money held or received for a client or third party in connection with regulated services (or as a trustee, nominee or as a legal aid provider). Own money: money belonging to the firm. Client money must be kept in a client account at an authorised bank. Own money is kept in office accounts. Money must not be mixed ("commingled").
When to Use Client Account
Client money must be promptly placed in client account (Rule 2.3). Exceptions (where money need not go into client account): where it is received in payment of a bill or in anticipation of paying a bill that has already been sent; where it is paid directly to a third party; where the amount is de minimis and it is disproportionate to hold it. Out-of-scope services: money for non-regulated activities need not go into client account.
Withdrawals from Client Account
Client money can only be withdrawn for: the purpose it was held; returning it to the client; paying a bill of costs on proper delivery; paying a third party as authorised by the client; paying a disbursement on behalf of the client. Withdrawals must not exceed money held for that client. Solicitors must not make a payment from client account until any cheque received has cleared.
Interest on Client Money
Rule 7: a firm must have a written policy on interest. Interest must be paid where it is fair and reasonable to do so having regard to the amount held, the period, the rate available and the cost. A solicitor can agree with the client to deal with interest differently. Interest is generally credited to the client's matter.
Residual Balances and Accounting Records
Residual client balances: if money remains in client account after the matter is complete (e.g. client cannot be traced), the firm should make reasonable efforts to return it. After a period, balances may be paid to a charity. Firms must maintain accurate accounting records: client ledger for each client/matter, a client cash account, and a list of client balances.
The Accountant's Report
Rule 12: firms holding client money must obtain an annual Accountant's Report (from a reporting accountant approved by the SRA). The report confirms compliance with the Accounts Rules. The accountant checks client account balances, reconciliations, and accounting records. A qualified report (identifying a material breach) must be submitted to the SRA.
Key cases
The cases most commonly tested in SQE1 MCQs for Solicitors Accounts.
This topic is rule-based rather than case-based. Questions test precise knowledge of the SRA Accounts Rules 2019.
Other FLK2 topics
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