Handling client money is one of the most heavily regulated parts of a solicitor's work. Every firm must keep records that prove, at any moment, that the money it holds for clients is safe and entirely separate from its own. Double entry bookkeeping is the system that makes this possible — and getting the entries right is a core part of protecting both clients and the firm.
This lesson builds your understanding step by step, starting with the core mechanics and moving through real transactions to the warning signs of a breach.
What this lesson covers:
- Foundations of Double Entry — how the system works, why every transaction is recorded twice, and what debits and credits mean.
- The Client Ledger — how client ledgers are set up, the client side versus the business side, and what each balance tells you.
- Receipts and Payments of Client Money — the exact entries for money coming in and going out on a client's behalf, including disbursements.
- Billing and Transfers — recording profit costs and VAT, and moving billed money from client account to business account.
- Mixed Payments and Reconciliation — handling combined payments safely and checking the books reconcile.
- Client Money Shortfalls and Breaches — spotting a shortfall, putting it right, and avoiding unauthorised transfers.