Double-entry bookkeeping rules

Question 1

How should cheques payable to the client be treated?

Answer 1

If cheques made payable to client was received by firm and is not related to the work authorised body has done or is doing for the client then this should not be paid into client account as it is NOT client money.
* while it belongs to client, it has nothing related to what regulated services delivered by firm to the client.
* Also, cannot be in firm’s client account as it’s in the firm’s name, whereas cheque is payble to client not firm.
* Best for firm to forward cheque to client but no double entry as there has been no transaction.

Question 2

What is petty cash and how is it recorded?

Answer 2

Many authorised bodies keep a small amount of cash to deal with payments where its easier to deal with cash (e.g., taxi fare).

• Withdrawn from authorised body’s business account (non-client money)
• Separate record on cash sheet petty cash account (represents a separate pool of money than business account cash sheet).

Question 3

What happens when the client repays petty cash?

Answer 3

Still non-client money but it is paid into business account not petty cash bank account as there is no bank account for petty cash.

Question 4

What should be done when there is a transfer between authorised body’s bank account?

E.g., money out of client account and into authorised body’s business account?

Answer 4

Rule 4.3: when holding client money and some or all of that money will be used to pay your costs:
* you must give a bill of costs or other written notification of costs to client
* must be done before transfer
* such payment must be for specific sum in bill of costs or written notification

Question 5

What is the rule about mixed payments?

Answer 5

Mixed payments are funds which include client and non-client money and prompt allocation to correct client or business account is needed.
* if mixed payment was made entirely into client account then non-client money element must be promptly transferred out of client account to business account.

Question 6

What should happen if an authorised body makes a transfer from their client account to their business account?

Answer 6

1. Withdraw money from client account and
2. To pay money into business account

vice versa from business account to client account

Question 7

What are the two ways of dealing with mixed payments?

Answer 7

Either:
1. Putting entirety of money into one account and then transferringrelevant element account promptly tothe correct account or, (involves debiting)
2. If money has arrived by cheque, instruct bank to split cheque and pay part of money into authorised body’s client account and pay other part into business account (involves crediting)

Both are two step processes

Question 8

Transfer between two clients?

Answer 8

If acting for two clients and a transfer is being made from one client to another, this only involves one step
* this is because clinet moeny being transferred is already authorised’s body client account.
* Entries only involve client ledger client account.