Why this subject repays the effort
Solicitors Accounts is examined in both FLK2 sessions and it behaves differently from everything around it. A tort question can turn on a judgment call about remoteness; an accounts question turns on a rule that does not bend to the facts. Once you know the rule, the question is not hard — which makes this the most reliable source of marks in the paper for candidates who drilled it, and a consistent leak for those who decided it was accountancy and skipped it.
The one question every answer turns on
Almost every question reduces to: is this client money or business money? Get that right and the entries follow mechanically.
- Client money includes money held or received for a client or a third party, money held as trustee or in a similar fiduciary role, and money received for a disbursement the firm has not yet paid and is not yet liable to pay.
- Business moneyincludes the firm’s own money, fees already billed, and reimbursement of disbursements the firm has already paid from its own funds.
The consequences are absolute. Client money goes into the client account promptly and is kept separate. Business money does not go into the client account, and client money does not sit in the business account. A payment that mixes both — a cheque covering costs and a disbursement not yet paid — is the classic exam scenario, and the safe answer is almost always to bank it in the client account and transfer the business element out promptly.
The rules that generate the questions
- Keeping money separate and paying client money promptly into a client account, with the limited exceptions the rules allow.
- Withdrawals from the client account— only for the purpose for which the money is held, only on proper authority, and never taking more than that client’s money.
- Transfers of costs: money can be moved from client to business account once a bill has been delivered or the client has been notified of the costs incurred, and promptly after.
- No banking facility. A client account is for money held for a legal matter, not a place to park funds or move them about for a client.
- Interest: a fair and reasonable policy, accounted for on client money held.
- Breaches: corrected promptly, on discovery, and usually replaced from the firm’s own money rather than another client’s.
- Records and reconciliations: the ledgers to keep, and the reconciliations to perform at the required intervals.
- Third-party managed accounts and the conditions on using one instead of a client account.
What the questions look like
Three shapes recur, and it is worth recognising them instantly:
- Classify and post.“A firm receives £2,400 from a client, being £1,500 on account of costs and £900 for a search fee not yet paid. Which of the following is correct?” The work is classification; the options differ in which account each element lands in.
- The breach.Something has gone wrong — a payment from the wrong account, a transfer before a bill — and the question asks what the firm must do now. Correct promptly, from the firm’s own money, and do not use another client’s funds.
- The conduct hybrid. An accounts question that is really about ethics: a client asking the firm to receive and pass on money unrelated to any legal work is the banking facility prohibition, not a bookkeeping problem.
The traps
- Disbursements already paid. If the firm has paid it, money received to reimburse it is business money. If the firm has not, it is client money. Half the classification errors live here.
- Transferring costs before billing. Tempting in the scenario, wrong under the rules.
- Fixing a shortfall with the wrong money.Replacing a shortage from another client’s balance turns one breach into two.
- Mixed receipts. The option that splits the cheque at the point of receipt usually looks tidier than the answer the rules require.
How to drill it
This is the subject where volume converts directly into marks. Twenty questions a week for a month will take most candidates from guessing to certainty, because the rule set is finite and the question shapes repeat.
Practise it in the context it will be examined in — an estate administration in one session, a conveyancing transaction in the other, as the FLK2 guide sets out — and review every option, not just the one you chose. Our FLK2 warm-up sets include accounts questions with the rule cited behind each answer; they are free to try.