Accouting of Client money in online broking house

1) What accoutning entries would be passed by a broking house when a client deposits money into his cash account with the broker with an objective of using this money for trading later?
Assume that this broking house has a client pool account maintained with it's banker

2) Once the client strikes a trade, what entries will the broking house pass?

3) what entry will be passed to effect payment for the purchase of the shares to the stock exchange by the broker?

Replies (3)

  1. Bank Ac  Dr

           To Client deposit account

 

(Being client deposited the money on his account)

 

  1. Equity shares investment account Dr

            To bank / to stock exchange control account

(being shares purchased from stock exchange on behalf of client)

 

  1. Client deposit account  Dr

                  To Equity share investment account

       (Being shares transferred to client’s demat account)

 

  1. Client deposit account  Dr

             To brokerage account (credited to p&l)

             To security transaction tax payable account (Liability)

  (Being brokerage and security transation tax payable transferred)

     

Thanks Kingsley,

I have a related question

Would you know, if the brokers maintain a trust or an escrow account with the banks for the client's deposit with them ??

I guess they should. Only from that account, they will buy shares i guess.

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