A Legal Practitioner is expected to keep the following books of accounts:

1. Cashbook: this is the daily, weekly and monthly entry of transactions that take place in a law firm. It is temporal form of record keeping, its not a permanent one. This deals with the record of the entries relating to the income and expenditure in a law firm.
2. Ledger: This is a permanent form of record keeping
3. Journal: This is like a diary, it’s not mandatory for a Legal Practitioner to have a journal. It is a form of temporary book keeping method.Daily entries are recorded into the journal before they are permanently transferred into the Ledger

 

CASH BOOK

Legal practitioners are expected to have their income and expenditure recorded in a Cashbook. A Legal Practitioner is means to keep three types of cashbook:

1. Client cash book
2. Trust cashbook, and

• Personal cashbook.

Debit the receiver, credit the giver.- it is more blessed to give  than to receive. So for everything they receive they debit the account, and for everything you give you credit your account

Always include the date at the top of the page. Title of the document and date

Date, particulars, debit and credit

You have to put the transaction in the proper order according to the date it occurred, so earliest transaction first. If there is more than one source of capital, separate it and itemise them in the order they occurred.

The date at the top can be the date of the last entry or date of exam, preferably last date of last entry.

 

Classwork

Mr John Dada was called to the Nigerian bar after three attempts in 1999. On the 9^th day of January 2000, Mr.Dada’s villagers contributed the sum of N100, 000.00 and gave him for the establishment of his law firm, his fiancé Susan gave him N500,000.00 to seal her love for him and Mr. Dada withdrew N500,000.00 from his zenith Bank account all on the same day.

On the 10^th February 2000, Mr. John rented a one room apartment for his law office at the rate of N30,000 per annum. He paid for two years.

On the 13^th of March 2000, Mr john bought a pair of Italian suit, table and chair, refrigerator and law reports at N100,000.00, N100,000.00, N40,000.00 and 300,000.00 respectively.

On the 16^th of May 2000, Mr. John bought an office printer and a laptop at N50,000.00 and N150,000.00  respectively. He also gave his secretary Chinaza the sum of N20,000.00 as out of pocket expenses for the office.

Draw up Mr. John’s cash book.

 

Mr JOHN DADA’S CASH BOOK – 6^TH APRIL 2018

DATE correct	PARTICULARS correct	DEBIT (N)	CREDIT (N)
9/1/2000	Capital  (villagers contribution)	100,000.00
9/1/2000	Capital (Fiancé - Susan)	500,000.00
9/1/2000	Withdrawal (Zenith Bank account)		500,000.00
10th Feb 2000	Rent for law office (two years)		60,000.00
13th March 2000	Wardrobe (Italian suit)		100,000.00
13th March 2000	Furniture (Table and chair)		100,000.00
13th March 2000	Electronic appliances (Refrigerator)		40,000.00
13th March 2000	Books (Law reports)		300,000.00
16th May 2000	Electronics (Office printer)		50,000.00
16th May 2000	Electronic (Laptop)		150,000.00
16th May 2000	Out of pocket expenses (chinaza)		20,000.00
16th May 2000	Balance c/d	720,000
16th May 2000	Balance b/d	1,320,000	1,320,000

 

 

Mr Ijesha was called to the Nigerian bar in 2000. On the 10^th of January 2018 Mrs Adebiyi the DDG gave him 1 million naira as a take up grant. On the 1^st of January Mr ijesha collected a loan of 1 million naira from zenith bank. On the 2^nd of January Mr ijesha bought a plot of land in Epe at N500,000, he also printed some file jackets, complimentary cards and bill board at N50,000 , N100,000 and N100,000 respectively.

Draw up Mr Ijesha’s cashbook   

 

MR IJESHA’S CASH BOOK – 2^ND JANUARY 2018

DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1/1/18	CAPITAL (Loan)	1,000,000.00
2/1/18	Purchase of land		500,000
2/1/18	Stationery (file jackets)		50,000
2/1/18	Stationery (complimentary cards)		100,000
2/1/18	Advertisement (bill board)		100,000
10/1/18	CAPITAL (take up grant – Mrs Adebiyi)	1,000,000.00
10/1/ 18	Balance c/d		1,250,000
10/1/18	Balance b/d	2,000,000	2,000,000

 

Balance c/d = Balance carried down = sum of everything on the credit column – sum of everything on the debit column, then add it to the deficient column.  

Balance b/d = balance brought down = addition of your balance carried down to all that is up. They have to be the same thing

 

LEDGER

• Permanent form of record keeping
• Contains entries of individual items on the cash book
• Each account has an appropriate heading and it is adequately categorised
• FORMULA: LEDGER = COMMON SENSE.
• The giver is debited and the receiver is credited
• Particulars under ledger iseither cash or cheque. If its a loan it could be either cash loan or cheque loan.
• It is in a closed box
• You use your cash book to draw your ledger

 

 

Classwork

Mr John Dada was called to the Nigerian bar after three attempts in 1999. On the 9^th day of January 2000, Mr.Dada’s villagers contributed the sum of N100, 000.00 and gave him for the establishment of his law firm, his fiancé Susan gave him N500,000.00 to seal her love for him and Mr. Dada withdrew N500,000.00 from his zenith Bank account all on the same day.

On the 10^th February 2000, Mr. John rented a one room apartment for his law office at the rate of N30,000 per annum. He paid for two years.

On the 13^th of March 2000, Mr john bought a pair of Italian suit, table and chair, refrigerator and law reports at N100,000.00, N100,000.00, N40,000.00 and 300,000.00 respectively.

On the 16^th of May 2000, Mr. John bought an office printer and a laptop at N50,000.00 and N150,000.00  respectively. He also gave his secretary Chinaza the sum of N20,000.00 as out of pocket expenses for the office.

 

DATE correct	PARTICULARS correct	DEBIT (N)	CREDIT (N)
9/1/2000	Capital  (villagers contribution)	100,000.00
9/1/2000	Capital (Fiancé - Susan)	500,000.00
9/1/2000	Withdrawal (Zenith Bank account)		500,000.00
10th Feb 2000	Rent for law office (two years)		60,000.00
13th March 2000	Wardrobe (Italian suit)		100,000.00
13th March 2000	Furniture (Table and chair)		100,000.00
13th March 2000	Electronic appliances (Refrigerator)		40,000.00
13th March 2000	Books (Law reports)		300,000.00
16th May 2000	Electronics (Office printer)		50,000.00
16th May 2000	Electronic (Laptop)		150,000.00
16th May 2000	Out of pocket expenses (chinaza)		20,000.00
16th May 2000	Balance c/d	720,000
16th May 2000	Balance b/d	1,320,000	1,320,000

 

 

MR JOHN DADA’S LEDGER – 9/1/2000

CAPITAL ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	9/1/2000	CASH		100,000.00
2)	9/1/2000	CASH		500,000.00

 

BANK ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	9/1/2000	CASH (Withdrawal)	500,000.00

 

RENT ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	10/2/2000	CASH	60,000

 

WARDROBE ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	13/3/2000	CASH	100,000

 

FURNITURE ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	13/3/2000	CASH	100,000

 

ELECTRONIC APPLIANCES ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	13/3/2000	CASH	40,000
2)	16/5/2000	CASH	50,000
3)	16/5/2000	CASH	150,000

 

BOOK ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	13/3/2000	CASH	300,000

 

OUT OF EXPENSES ACCOUNT/ IMPREST ACCOUNT

S/N	DATE	PARTICULARS	DEBIT (N)	CREDIT (N)
1)	16/5/2000	CASH	20,000

 

 

 

LEGAL PRACTITIONERS ACCOUNT

 

All Legal Practitioners shall keep proper books of account in relation to their practices.Legal Practitioners account is governed by:

1. The Legal Practitioners Act 1975;
2. The Legal Practitioners Account Rules 1964;
3. Rules of Professional Conduct 2007.

 

Types of account

A Legal Practitioner is expected to keep the following types of banks accounts.

1. Client account
2. Trust Bank Account
3. Personal, Individual or Partnership Account – the running account, day-to-day account.

All these accounts can either be savings or current in nature

You can have one trust account for all your trust or individual trusts accounts.

 

Reasons for keeping books of account

1. It enables the Legal Practitioner to assess the value of his practice at any given time;
2. It enables the Legal Practitioner to know his debtors and creditors at a glance;
3. In the case of a partnership, it enables each partner to know the exact financial position of the partnership;
4. It makes for easy assessment of the individual or partnership tax liability at the end of the financial year.
5. It enhances business efficacy.
6. It enables the Legal Practitioner to effectively plan for the upcoming year
7. It also enables the Legal Practitioner to be able to distinguish between his personal money and client money

 

Definition of terms

• Who is a client? These shall include any person on whose account a Legal practitioner holds or receives client money.
• What is client’s money? This is the money held or received by a legal practitioner on account of a person for whom he is acting in relation to the holding or receipt of such money either as a legal practitioner or in connection with his practice as a Legal Practitioner, as agent, bailee, stakeholder or in any other capacity.

 

Clients’ money excludes the following

1. Money held or received on account of the trustees of a trust of which the legal practitioner is a solicitor trustee, or
2. Money to which the only person entitled is the practitioner himself.

 

 

CLIENT’S ACCOUNT

• CLIENT ACCOUNT - Shall mean a current or deposit account at a bank in the name of the legal practitioner, the title of which the word "client" appears.

 

TRUST MONEY

• Monies held or received by a legal practitioner which is not client's money and which is subject to a trust of which the Legal Practitioner is a "Solicitor - Trustee" of such trust.

 

CLIENT BANK ACCOUNT

• Any account (whether savings or current) where clients money is kept.
• A solicitor might open a separate clients account or a joint client’s account.

 

TRUST BANK ACCOUNT

• This is the account (whether savings or current) where Trust monies are kept.
• A solicitor might open a separate trust account or a joint trust account.

 

CLIENT BANK ACCOUNT

• A Legal Practitioner that HOLDS or RECEIVES money on behalf of a client must open a client account and deposit same into such account.
• This can either be a savings account or a current account.
• The Legal Practitioner may open ONE CLIENT ACCOUNT for all his clients or a specific account for each client.

 

Sources of client’s money

1. Conveyancing
2. Executorship and trusts
3. Investment management
4. Agency work
5. Litigation
6. Mediation/arbitration
7. Fees on account

Client’s money received must be banked without delay UNLESS otherwise directed by the client in writing.

 

Monies payable into clients account

1. Trust money
2. Money meant to replace any money which the Legal Practitioner mistakenly withdrew from the clients account
3. Money used by the LP to open or maintain the clients account
4. Any cheque or drafts which contains both trust money and clients money which the lawyer did not split.

See Rule 3 & 4 Legal Practitioners Account Rules.

 

 

• No personal money of the lawyer must be paid into the clients account except money used in opening or maintaining the clients account.
• The clients’ account must be opened in the name of the Lawyer but he can designate it with specifics to differentiate it from other clients account.

 

When can a lawyer withdraw money from a clients account?

1. Payment to the client
2. Payment on behalf of the client
3. Any money which the client authorised its withdrawal.
4. Reimbursement of the lawyer by the client where the client owed the Lawyer.
5. Reimbursement of the lawyer over expenses made by him on behalf of the client.
6. Money for payment of costs incurred by the Lawyer in the course of acting for the client.

 

When can trust money be withdrawn from the client’s account

1. Money for payment in the execution of a Trust.
2. Money mistakenly or accidentally paid into the account by the Lawyer.
3. Money to be transferred to a separate trust bank account.
4. Trust money contained in a cheque or draft which was not split by the lawyer which

 

Clients money which may not be paid into the clients account

1. Cash received by the lawyer which he paid directly to a third party or the client.
2. A cheque or draft, which he received on behalf of the client which was handed over to the client directly.
3. Monies paid directly into the clients account.

 

Clients money that shall not be paid into clients account

1. Any money which the client in writing directs the lawyer not to pay into client account.
2. Any money which the client pays to the lawyer in settlement of a debt owed.
3. Reimbursement made to the lawyer by the client in respect of expenses made on behalf of the client.
4. Any other money belonging to the Legal Practitioner which is not permitted by the rules to be paid into the clients account.

 

 

TRUST BANK ACCOUNT

• Where the Lawyer is a Solicitor Trustee and he holds or receives any money which is subject of a trust, the lawyer is expected to open a trust bank account.

 

Monies payable into a trust bank account

1. Money subject to a trust.
2. Money used to open and maintain the account by the Lawyer.
3. Money used to replace any money which the solicitor mistakenly or accidentally withdrew from the trust bank account.
4. A cheque or draft containing partly trust money and client money where such has not been split by the solicitor trustee.
5. Any money which the court may order to be paid into the trust account.

 

 

When a Legal Practitioner is not mandated to pay trust money into a trust account

1. Cash received and immediately paid outin cash in execution of a trust.
2. Cheque or draft received and endorsed to a third party in execution of a trust.

 

When a legal practitioner can withdraw money from a trust bank account

1. Money required for the execution of the trust.
2. Money mistakenly paid into a trust account.
3. The Legal Practitioners money used to open and maintain the trust account.
4. Lumped money to be transferred to a client account.
5. Any other money, which the General Council of the Bar may authorise in writing.

 

PERSONAL/ PARTNERSHIP ACCOUNT

• A Legal Practitioner must keep his PERSONAL MONEY in an account so designated. Such should not be deposited into a Clients account or a trust bank account.

 

Mode of withdrawal from a client or trust bank account

1. Written declaration to withdraw by the client.
2. Issuance of cheque by the client to the lawyer.
3. Transfer to the clients accounts or any other account so directed

The client must authorise all this.

 

Preservation of book of account

• Books of account should be preserved for a minimum of six years from the date of last entry.

 

Inspection and enforcement

It is the responsibility of the Bar council to inspect the Legal Practitioner Books of account.

The Bar Council can do so:

1. On their own motion; or
2. On a request by any branch of the NBA;
3. On a request by a third Party.

The Legal Practitioner will produce the books and such will be inspected.