Introduction

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Pursuant to section 83(1) of the Advocates Act, the Council of the Law
SocietyofKenyaisgrantedthepowertomakerulesregardingthekeepingof
accountsbyadvocates.
In addition to the usual accounts prepared for accounting purposes an
advocateisrequiredtomaintainaclientsaccountandafeeincomeaccount.
Additionally,thecashbookwillhavetwocolumnsonboththedebitandthe
creditside,onetorecordofficetransactionsandtheothertorecordclient
transactions.
Theclientsaccounthastwocolumns,onetorecordclientswithsufficient
funds and one with insufficient funds. It is opened in the name of each
individualclientandrecordsthefollowing:
Depositsandwithdrawalsonbehalfoftheclient
Paymentsmadeonbehalfoftheclient
Withdrawalsofprofessionalfeesasauthorizedbytheclient.
Anadvocatemaywithdrawmoneyfromtheclientaccountonlywherethere
isproperauthorizationtodoso.
Advocatesaccountshavecertainspecialfeatures:
Sincenotradingiscarriedoutnotradingaccountisprepared.Insteadeither
anincomeandexpenditureaccountoraprofitandlossaccountisprepared.
The income is ascertained by preparing a fees income account (which is
essentiallylikethesalesaccount)
Incomemayberecognizedoneitheracashbasis(whenreceived)orunderan
accrualsbasis(whenearned)althoughitiscommonforthelattertobeused.
Whencomputingthefeeincomeitisimportanttofactorinworkinprogress.
This is the valueof work commenced on behalf ofthe clientbutnot yet
completedbytheyearend,e.g.acasependingincourtasattheendofthe
year.
Inordertocomputethefeeincomeinaperiodwheretherewasworkin
progressthefollowingadjustmentsshouldbemade:
FeesIncome
xx
Add:ClosingWIP
xx
Less:OpeningWIP
(xx)
Feesincomefortheyear
xx
whenaclienthasinsufficientfundsinhisclientaccount,anypaymentmade
bytheadvocateonhisbehalfisreferredtoasadisbursementandshouldbe
reimbursedbytheclientassoonaspossibleasagreedupon.
AccountingEntries
Thefollowingaccountingentriesarecommon:
i. Torecordfundsreceivedonbehalfoftheclient
ii.
Dr.Cashbookclientscolumn

Cr.ClientAccountclientscolumn
Torecordpaymentsonbehalfofclientswithsufficientfunds
Dr.Clientaccountclientscolumn
Cr.Cashbookclientscolumn
Torecordpaymentsonbehalfofclientswithinsufficientfunds
Dr.Clientaccountofficecolumn
Cr.Cashbookofficecolumn
iv.Torecordfeeschargedtotheclient
Dr.ClientaccountOfficecolumn
Cr.FeesIncomeaccount
To record cash received from the client (fees charged and
disbursementspaidback)
xiv.
Dr.CashbookOfficeColumn
xv.
Cr.Clientaccountofficecolumn
Torecordtransferoffundsfromtheclientsaccounttotheofficeaccount
whenauthoritytodosohasbeengranted
Dr.CashbookOfficecolumn
Cr.CashbookClientcolumn
Torecordofficeexpenses
Dr.Expenses
Cr.CashbookOfficecolumn
Formatofaccounts
AccountantsCertificate
Pursuant to the Advocates (Accountants Certificate) Rules advocates are
requiredtodelivertothecounciloftheLSKacertificatesignedbyaduly
qualifiedaccountant.
Thecertificateprovidesanassurancethattheaccountanthas:
Madeageneralexaminationofthebooksofaccountoftheadvocateforthe
yearinquestion
Verifiedthataclientaccountwasmaintained
Made an examination of the cash and bank balance in relation to the
advocatespractice.
Comparedtheliabilityoftheadvocatetohisclientandthecreditbalanceof
theclientaccount
Askedforanyinformationandexplanationsashemayhaverequired.
IftheadvocatehasfailedtocomplywiththeAdvocates(Accounts)Rulesthe
accountantshouldnotsignthecertificate.
AccountantsCertificate
The following persons are exempted from the requirement to submit an
accountantscertificate:
Anadvocatewhoholdshisfirstpracticingcertificate

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Anadvocatewhodeliversastatutorydeclarationthatintheyearinquestion
hedidnotpracticeorholdorreceiveclientsmoney
Hasceasestoholdapracticingcertificate.

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iii.
I

Introduction

A partnership is defined as the relationship that subsists

between two or more persons carrying on a business in
common with a view of making profit.
Partnerships in Kenya are regulated by the Partnership
Act and the Limited Liability Partnership Act.
A partnership is formed on the basis of mutual agreement
between the partners. Thus, despite the fact that the law
does not impose the requirement for a partnership
agreement to be in writing it is common for partners to
prepare one.
The partnership agreement/deed contains information
outlining how the business will be run. Specifically, it
details, capital contributions, management duties, share
of profit, interest on capital, drawings, interest on
drawing, admissions and retirement etc.

Accounting for Partnerships

Partnerships will draw up the Trading, Profit and Loss
Account as well as the Balance Sheet. However, additional
sections will appear at the bottom of the profit and loss
account in which the profit or loss will be divided among
the partners. This is known as the appropriation account.
The partners therefore need to agree upon the profit
sharing ratio. If not, the Act stipulates equal shares for
each partner.
Partners may also be entitled to receive an interest on
their capital contribution to the business.
Active partners will usually receive a salary to
compensate them for the time and skills that they have
put into the business. The salary is however not treated
as an expense in the profit and loss account. It is instead
charged against the profit and loss appropriation
account.

Partners may take out cash or stock drawings. These

drawings will be charged to the respective partners, and
sometimes an interest on drawings may be expected from
the partners in return.

Partners personal accounts

Personal accounts usually involve two accounts drawn for
each partner i.e. the capital account and the current
account.
The capital account captures transactions of a long term
nature. In particular, capital contributed will be recorded
in this account.
The current account captures transactions of a short term
nature. This includes, distributions of profit, interest on
capital and partnership salaries. Any drawings and
interest charged thereon will also be recorded here.
The balance at the end of the year in the partners capital
and current account forms the aggregate capital in the
balance sheet. Partners may however choose to have one
personal account instead of two in which case there is no
split between transactions of a long term and short term
nature.
If partners make advances/loans to the business other
than their capital contributions a separate loan account
will be maintained. If the partnership were dissolved the
loan would be paid before capital but after other
liabilities.
Computation of Profit to be shared
When computing the profit to be shared among the
partners the following may be useful:
Net Profit (From P & L Account)
xx
Add: Interest on drawings
xx
Less:
Interest on capital
A
xx
B
xx
Salaries to partners A
xx
B
xx
(xx)
Profit for appropriation
xx
Partner A (Profit sharing ratio)
xx
Partner B (Profit sharing ratio)
xx
Partners current account