Solicitors Accounts for SQE1

How Solicitors Accounts is examined

Solicitors Accounts is one of the seven FLK2 subject areas, and it is examined in the context of Property Practice and of Wills and Estates. From January 2027 that means accounts questions can appear in both FLK2 sessions: with wills and probate in session 1 and with property in session 2. The SRA's specification asks candidates to apply double-entry bookkeeping and the SRA Accounts Rules to client money and money belonging to the firm, ledgers and bank accounts, interest, breaches, bills and record-keeping.

A question is a single best answer item like any other on the paper. It may ask which entries record a transaction, the most that can be transferred on a bill, or what a firm must do about a breach. The SQE1 syllabus sets the subject in context, and the FLK2 practice questions mix it with the rest of the paper.

Client money and client account

Client money is defined in rule 2.1: money relating to services for a client, money held for a third party (such as a deposit held as stakeholder), money held as trustee or in a specified office such as Court of Protection deputy, and money for fees and unpaid disbursements received before a bill is delivered. It is paid promptly into client account (rule 2.3), kept separate from the firm's money (rule 4.1) and returned promptly once there is no longer a proper reason to hold it (rule 2.5). A client account must not be used as a banking facility (rule 3.3), and a mixed payment is allocated promptly to the right accounts (rule 4.2).

The two-sided ledger

Each client ledger has a client account section and a business account section, each with debit, credit and balance columns (rule 8.1). Client money goes on the client side; bills, costs and anything else that is not client money go on the business side. The cash book, often called the cash sheet in SQE texts, has the same two sides.

Bills, withdrawals, breaches and records

Client money can pay the firm's costs only after a bill or other written notice of the costs, and only for the sum billed and covered by what is held for that client (rule 4.3). Any withdrawal must be for the purpose the money is held, on the client's instructions or with the SRA's prior written authorisation (rule 5.1), and needs enough money held for that client (rule 5.3). A debit balance on the client side of a ledger means another client's money has been used: rule 6.1 requires the breach to be corrected promptly and the money replaced immediately.

The firm accounts for a fair sum of interest on client money unless a different arrangement is agreed in writing (rules 7.1 and 7.2). At least every five weeks each client account is reconciled against the cash book and the total of client ledger balances, and the record is signed off by the COFA or a manager (rule 8.3). The scenario amounts in the trainer are illustrations; the rules and the VAT rate are as published by the SRA and HMRC.