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Review Your SQE 1 Practice Records

Examination Timing: 00H00M52S

A firm of solicitors is acting on behalf of a client who is selling his property and purchasing a new property. On exchange of contracts for the sale, the firm receives a deposit of £25,000 which is to be held as stakeholder. 

Which pair of double entries best shows how the receipt of the deposit should be recorded in the firm's accounting records?

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When a solicitors' firm receives money on behalf of a client to be held as stakeholder, it is recorded in the client account. The correct double entry for this transaction would be to credit the cash sheet client account to show the receipt of funds and debit the client ledger client account to record the client's entitlement to those funds. This ensures that the firm's records accurately reflect the handling of client money. 

Key Point: Solicitors must accurately record client money received into the client account, ensuring compliance with the Solicitors Regulation Authority (SRA) Accounts Rules. The correct accounting entries ensure transparency and proper management of client funds.

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