SQE1 Solicitors Accounts Revision Guide 2026: SRA Accounts Rules, Client Money and Ledgers

Why Solicitors Accounts is feared (and why it's actually one of the most learnable topics)

Solicitors Accounts is the topic candidates dread most going into FLK2 and the topic they often score highest on by exam day. The fear is understandable. The questions look like maths problems, the rules feel mechanical, and there is no narrative to fall back on the way there is in tort or contract. Either the entry is correct or it is not. Either the withdrawal was authorised or it was not. There is little room for clever argument.

The good news is that the same features that make Solicitors Accounts intimidating are exactly what make it the most predictable subject on the entire FLK2 paper. The SRA Accounts Rules are short — only 13 rules in the current 2019 framework — and the patterns they generate are repeatable. Once you have drilled the routines for receipts, withdrawals, mixed payments, bills and disbursements, almost every multiple-choice question on Solicitors Accounts collapses into one of about a dozen recognisable shapes.

You should expect roughly twelve to eighteen questions on Solicitors Accounts across FLK2's 180 MCQs. That is not the largest topic share but it is reliably the highest-yield revision per hour because the questions tend to test rule application rather than judgement. If you can identify whether money is client money under Rule 2.1, identify the rule engaged by the transaction, and run a clean dual-entry, you will pass this section comfortably.

This guide pairs naturally with the Trusts revision guide — together they account for the substantive backbone of FLK2 alongside Land, Wills, Probate and Property Practice. If you have not already mapped the FLK1 vs FLK2 split, read FLK1 vs FLK2: what's tested when before you start drilling.

The SRA Accounts Rules at a Glance

The current SRA Accounts Rules came into force on 25 November 2019, replacing the much longer 2011 Accounts Rules as part of the SRA's "Standards and Regulations" simplification. There are only 13 rules. You should know what each rule covers by number — examiners frequently anchor MCQs to a specific rule reference, and recognising the number on sight will save you reading time.

The full text is on the SRA website at sra.org.uk/solicitors/standards-regulations/accounts-rules — read it once, in full, before you start drilling questions. It will take you twenty minutes and it is the single highest-leverage thing you can do for this topic.

Definitions: Client Money, Client Account, Purpose-Only Use

The most common reason candidates lose Solicitors Accounts marks is misclassifying money at the door. Get the definition right and almost every downstream entry follows.

Client money under Rule 2.1

Rule 2.1 defines client money as money held or received by you:

• relating to regulated services delivered by you to a client;
• on behalf of a third party in relation to regulated services delivered by you (for example, money for an undertaking, an estate, or a stakeholder);
• as a trustee or as the holder of a specified office or appointment, such as a donee of a power of attorney or a Court of Protection deputy; or
• in respect of your fees and any unpaid disbursements received before the firm has delivered a bill or other written notification of costs.

The fourth limb is the most heavily examined. Money received "on account of fees and disbursements not yet billed" is client money — even though it is destined to become the firm's money. Until the firm has delivered a bill or other written notification, it sits in the client account.

Client account under Rule 3

A client account must be held at a bank or building society in England and Wales, must include the word "client" in its title, and must be a separate account from the firm's office account. Client money is held in the client account and only in the client account, save for the limited exceptions in Rule 2.2 (money held outside the client account in restricted circumstances such as when held under a TPMA or when the client has expressly instructed otherwise in writing).

Purpose-only use under Rule 5

Rule 5 underwrites the entire framework. You may withdraw client money only:

• for the purpose for which it is being held;
• following receipt of instructions from the client (or third party for whom it is held); or
• on the SRA's prior written authorisation, or in prescribed circumstances.

Reframed in exam-friendly form: every withdrawal must be matched to a permitted purpose. If the question shows you a withdrawal that does not match a permitted purpose, the answer is "Rule 5 breach" — even if the firm later replaces the money.

Receipts: Rule 4 in Practice

Rule 4 governs how money comes in. There are three sub-rules to memorise.

Rule 4.1 — pay client money in promptly

You must pay client money into a client account "promptly". The SRA does not define "promptly" by a fixed number of days, but the regulator's published guidance treats anything beyond the day of receipt or the next business day as borderline. For SQE1 purposes, treat "promptly" as "without delay" — if a question places a five-day or seven-day gap between receipt and banking, that is your red flag.

Rule 4.2 — mixed receipts

A "mixed receipt" is a single payment that contains both client money and business money. The classic example is a cheque for completion monies that includes a sum representing the firm's outstanding fees. Rule 4.2 gives you two compliant routes:

1. Split at receipt. Pay the client money portion into the client account and the business money portion into the business account on the day of receipt.
2. Pay all to client account, then transfer. Pay the entire mixed receipt into the client account, then transfer the business element across to the business account "promptly".

Both are permitted. What is not permitted is paying the entire mixed receipt into the business account and transferring the client portion across — that is a Rule 4.2 breach because client money has been held outside the client account.

Rule 4.3 — disbursements paid in advance

Money received specifically for a disbursement that has not yet been incurred is client money and must be paid into the client account. Once the firm has incurred the disbursement and either paid it directly or rendered a bill, the firm may transfer the relevant sum across.

Withdrawals: Rule 5 in Practice

Rule 5.1 — three preconditions

A withdrawal from the client account is only permitted if it is:

• (a) for the purpose for which the money is being held (or with the client's instructions, or under SRA authority);
• (b) authorised by the client;
• (c) of an amount that does not exceed the funds held for that client (the "no overdrawing on a client" principle).

Limb (c) is critical. You cannot use Client A's money to pay a disbursement for Client B, even if the firm intends to put the money back the next day. Each client ledger must remain non-negative at all times.

Rule 5.2 — senior person authorisation

Withdrawals must be appropriately authorised. In practice, firms have written internal policies — often requiring a partner or senior fee-earner to sign off on withdrawals over a stated threshold. SQE1 questions sometimes test the basic point that a junior employee cannot self-authorise a substantial client account withdrawal.

Rule 5.3 — replacing improper withdrawals

Where money is improperly withdrawn from the client account — whether by mistake, by overdrawing, or by genuine fraud — the firm must replace it "promptly". This duty sits alongside Rule 6, which obliges you to correct any breach as soon as you become aware of it. Replacing the money does not undo the original breach for disciplinary purposes; it simply restores the client.

Residual client balances — Rule 5.1(c)

Where a small balance remains on a client matter that the firm cannot reasonably return to the client (for example, the client has died and no executor has been traced), Rule 5.1(c) permits the firm to pay it out to a charity of the firm's choosing if the balance does not exceed the de-minimis threshold (currently £500 per client matter). For balances above that threshold, the firm must apply to the SRA for prior written authorisation.

Bills, Costs and Disbursements

Once the firm has delivered a bill or other written notification of costs, the money owed for fees and any incurred disbursements becomes business money. The firm may then transfer that sum from the client account into the business account.

Agency vs principal disbursements — the VAT distinction

This is the single most heavily examined sub-topic in Solicitors Accounts. The distinction is about who the supplier is contracting with.

The shorthand is: agency = client's cost passed through; principal = firm's cost re-billed. If the question shows the firm paying for an expert report it commissioned and re-billing with VAT, that is a principal disbursement. If the question shows the firm paying a Land Registry fee on behalf of the client, that is an agency disbursement and no VAT is added.

Transferring money for fees and incurred disbursements

The firm cannot simply move money from client to business account whenever it likes. There must be a triggering event. The two acceptable triggers are:

• delivery of a bill of costs to the client; or
• delivery of "other written notification" of costs (for example, an interim statement detailing fees incurred to date).

Once that document has been delivered, Rule 4.3 permits the transfer for the fees and incurred disbursements covered by the notification. Transferring before the trigger is a Rule 5 breach.

Interest on Client Money: Rule 7

Rule 7 obliges the firm to account to the client for "a fair sum of interest" on client money held in the client account. Three points matter for SQE1.

1. The SRA does not prescribe a rate. Each firm sets its own written interest policy, which must be available to the client. Examiners will usually frame this as a question about whether a given firm's policy is reasonable.
2. The "fair" benchmark is contextual. Interest rates available on a comparable instant-access account at a high-street bank are the usual reference point.
3. De minimis exception. Most firm policies set a minimum threshold — for example, the firm will not account for interest where the sum involved is below a stated amount (often £20 or £50) over the period it was held. This must be in the firm's policy.

Interest paid to the client comes out of the firm's own funds (the business account), not from interest accrued in the pooled client account.

Joint Accounts and Third-Party Managed Accounts

Rule 9 — joint accounts

Where the firm operates a bank account jointly with a client or third party (for example, a stakeholder account during a property development), the firm must obtain statements at no less than a five-weekly interval and keep those statements with its accounting records. The firm does not need to run dual-entry bookkeeping in the same way as for a client account, but the statements must be retained and reconciled.

Rule 11 — Third-Party Managed Accounts (TPMAs)

A TPMA is an escrow-style account operated by an authorised third party (usually a regulated payment service provider). Rule 11 permits a firm to use a TPMA in lieu of a client account if the firm gives the client written information explaining the TPMA arrangement, the regulator of the third-party operator, and the implications of money being held outside a SRA-regulated client account. The firm must take reasonable steps to satisfy itself that the TPMA arrangement is appropriate for the client.

Bookkeeping Basics

Rule 8 requires the firm to keep accurate, contemporaneous accounting records, in particular:

• a separate ledger for each client (and, where relevant, each matter for that client);
• a cash book showing all movements through the client account;
• a record of bills delivered.

The system runs on a dual cashbook: the client cash book records the firm's pooled bank position on the client side, while the business cash book records the office side. Each individual client also has their own ledger card showing only that client's running balance.

The cardinal rule: every entry has equal credit and debit

For every transaction, a debit on one side must be matched by a credit on the other. Where money moves between client and business accounts, four entries are required: a CR/DR pair on the client side and a CR/DR pair on the business side. The aggregate balance on the client account must never go negative, and no individual client ledger may go negative either.

Conventions

• Debit (DR) on the client ledger means money paid out for that client.
• Credit (CR) on the client ledger means money received for that client.
• The cash book mirrors the client ledger from the firm's perspective.

Worked Examples

Example 1 — Simple receipt and withdrawal

You receive £5,000 from Client A on account of fees and disbursements. You then pay a £1,800 Land Registry fee on Client A's behalf.

Example 2 — Mixed receipt

You receive a £20,000 cheque on completion. £18,500 represents the balance of purchase price held to the seller's order, and £1,500 represents the firm's outstanding fees per a bill already delivered.

Compliant route 1 — split at receipt:

• £18,500 to client account (CR client ledger, DR client cash book).
• £1,500 to business account (CR business ledger, DR business cash book).

Compliant route 2 — pay all to client account, transfer:

• Day 1: £20,000 to client account (CR client ledger £20,000, DR client cash book £20,000).
• Day 1 (or promptly thereafter): transfer £1,500 client-to-business (DR client ledger, CR client cash book; CR business ledger, DR business cash book).

Non-compliant: paying the entire £20,000 into the business account and then transferring £18,500 across to the client account. That is a Rule 4.2 breach.

Example 3 — Bill delivery and transfer

You hold £4,000 on Client B's ledger. You deliver a bill for £1,200 plus £240 VAT (total £1,440). You may now transfer £1,440 from the client account to the business account.

Example 4 — Agency vs principal disbursement

(a) Agency: firm pays a £40 Land Registry fee on Client C's behalf. No VAT added. Client account funds available — pay direct from client account.

(b) Principal: firm commissions a £600 expert report. The supplier invoices the firm. Firm pays from business account. Firm later bills Client C £600 plus VAT, and transfers £720 from client account once funds are held and the bill has been delivered.

Example 5 — Refund of overpayment

Client D pays £2,000 for a service that costs £1,800. After the bill is delivered and the £1,800 transferred, the residual £200 must be refunded to Client D promptly. If for some reason the firm cannot trace Client D and the balance is below £500, Rule 5.1(c) permits payment to charity. Above £500, SRA prior written approval is required.

Reconciliations: Rule 8

The firm must perform a reconciliation of the client account at intervals of not more than five weeks. The reconciliation compares:

• the total of the client cash book balance;
• the total of all individual client ledger balances; and
• the bank statement balance for the client account.

All three must agree. Any discrepancy is a breach that engages Rule 6 (duty to correct).

Accountant's report — Rule 12

Most firms holding client money must obtain an accountant's report annually within six months of the firm's accounting reference date. The report is delivered on the AR1 form and may be either qualified (where the accountant identifies material breaches) or unqualified. A qualified report must be delivered to the SRA. An unqualified report must be retained but does not need to be filed unless the SRA requests it.

There are limited exceptions to the obligation — for example, where the firm holds only small amounts of client money for limited categories of work, the firm may not be required to obtain a report at all.

Quick-Reference Table of Common Entries

Common Patterns Examined

• VAT on disbursements. Always classify agency vs principal first. If you cannot tell, the test is "who is the supplier's customer?".
• Cheques received in mixed form. Apply Rule 4.2 — split or pay-all-and-transfer. Never the reverse.
• Refunds. Refunds of client money come out of the client account. Refunds of business money come out of the business account.
• Clear-funds rule. A withdrawal can only be made when the client has actually received funds — not when the firm has banked a cheque that has not yet cleared.
• Rule 5 breach scenarios. Watch for: paying Client B's disbursement out of Client A's funds; transferring fees before a bill has been delivered; withdrawing more than the client's ledger balance.
• Bank errors. A bank's mistake that pushes the client account into deficit must be replaced by the firm immediately from business funds, even though the firm did not cause it.

10 Solicitors Accounts Exam Techniques

1. Read the question for the rule before you read the maths. The MCQ usually points to a specific rule (4.2, 5.1, 7, etc.). Identifying the rule before you compute the entries cuts the answer space by half.
2. Classify the money first. Is it client money under Rule 2.1, business money, or trust money? You cannot do the bookkeeping until you know.
3. Check the trigger for any client-to-business transfer. No bill or written notification = no transfer.
4. Watch for agency vs principal in any disbursement question. Always.
5. Mentally run the dual-entry as you read. For each transaction, you should already know which ledger gets the DR and which gets the CR before you look at the answer options.
6. Distinguish "promptly" from "within a defined period". "Promptly" is the default standard for Rule 4.1 and Rule 5.3; the five-weekly reconciliation interval is the only fixed period in the rules you need to know cold.
7. Cross-check against the no-overdrawing principle. If the answer requires Client A's funds to cover Client B, it is wrong.
8. Use Rule 6 to spot replacement-of-funds questions. A breach plus replacement is still a breach — Rule 6 obliges correction, not exoneration.
9. For interest questions, look for a firm policy reference. Rule 7 is policy-based, not rate-based.
10. For residual balance questions, the £500 line is decisive. Below £500: charity under Rule 5.1(c). Above £500: SRA prior written approval.

Common SQE1 Solicitors Accounts Mistakes

1. Treating advance fee payments as business money. Money received on account of fees, before a bill has been delivered, is client money under Rule 2.1.
2. Paying mixed receipts entirely into the business account. Always client first (or split at source). Never business first.
3. Forgetting VAT on principal disbursements. Counsel's fees and similar principal disbursements attract output VAT when re-billed.
4. Ignoring the no-overdrawing principle on individual client ledgers. The aggregate client account being in surplus is not enough — each individual ledger must also be non-negative.
5. Confusing the five-weekly reconciliation with the annual accountant's report. Rule 8 is monthly-ish (every five weeks); Rule 12 is annual.
6. Treating the residual balance threshold as a soft figure. It is a hard line under Rule 5.1(c) — anything above it requires SRA approval.
7. Misclassifying the firm's bank charges. Bank charges incurred on the client account that should fall on the business must be reimbursed from business funds; charges that genuinely relate to a client matter (rare) are permitted to be deducted only if the rules permit.

How to Structure Your Solicitors Accounts Revision

Solicitors Accounts rewards short, repeated drilling more than long study sessions. The aim is to make the dual-entry pattern automatic.

Week 1 — Foundations

• Read the SRA Accounts Rules in full once.
• Memorise the rule-by-rule table above.
• Run through Rule 2.1 (client money definition) until you can recite the four limbs from memory.
• Drill 20 MCQs focused on classification (is this client money?). Use the quick quiz tool and filter to Solicitors Accounts.

Week 2 — Receipts, withdrawals and mixed money

• Memorise Rule 4 and Rule 5 with sub-rules.
• Practise the mixed-receipt routine with five worked examples on paper.
• Drill 30 MCQs — half on receipts, half on withdrawals.
• Begin building flashcards for the rule numbers and the dual-entry patterns.

Week 3 — Bills, disbursements and VAT

• Drill agency vs principal disbursements until automatic.
• Work through five bill-delivery scenarios end-to-end, including the transfer entries.
• Practise refund and overpayment scenarios.
• Drill 30 MCQs across this area.

Week 4 — Interest, reconciliations, residuals, and pattern recognition

• Memorise Rule 7, Rule 8, Rule 12.
• Drill 40 mixed-topic MCQs at exam pace (90 seconds per question).
• Re-test on classification and rule-number recognition.
• Final read-through of the rules in full.

If you want to pace this more intensively, see the SQE1 MCQ technique guide for question-handling tactics that compound across all FLK2 topics.

Final Thoughts

Solicitors Accounts is not the topic to skim. It is the topic to drill. The rules are short, the patterns are predictable, and the marks come quickly to candidates who have done the repetitions. Get the classification right at Rule 2.1, identify the rule engaged, run a clean dual-entry, and the questions answer themselves.

If you score weakly on Solicitors Accounts in mocks, the fix is volume of MCQs rather than re-reading the rules. Aim for a minimum of 150 Solicitors Accounts MCQs across your revision cycle.

Next steps

• Start a focused Solicitors Accounts quick quiz
• Browse the Solicitors Accounts study deck
• Spaced-repetition flashcards for the SRA Accounts Rules
• How to pass SQE1 in 2026
• The SQE1 hardest subjects ranked
• How to use spaced repetition for SQE1
• Pricing and full-access plans