Trust Accounting Workbook Questions and Exercises Booklet

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Practice
Management
Course
Trust Accounting Workbook
Questions and Exercises Booklet
Table of contents
Introduction ............................................................................................................................................ 4
Section 1: Recognising trust and other money ................................................................................. 5
Recognising trust money ................................................................................................................. 5
Recognising trust funds ................................................................................................................... 6
Dealing with trust money.................................................................................................................. 7
Maintaining records .......................................................................................................................... 8
Answers ........................................................................................................................................... 9
Section 2: Completing primary records ............................................................................................ 12
Primary records .............................................................................................................................. 12
Writing receipts .............................................................................................................................. 13
Trust account deposit form ............................................................................................................ 14
Writing receipts and bank deposit records ..................................................................................... 15
Writing cheques ............................................................................................................................. 15
Trust transaction list for July .......................................................................................................... 16
Answers ......................................................................................................................................... 17
Section 3: Understanding secondary records ................................................................................. 22
Secondary records ......................................................................................................................... 22
Receipts cash book ........................................................................................................................ 22
Ledger ............................................................................................................................................ 24
Payments cash book ...................................................................................................................... 25
Ledger ............................................................................................................................................ 26
Trust transfer journal ...................................................................................................................... 27
Answers ......................................................................................................................................... 29
Section 4: Understanding office accounts ........................................................................................ 30
Receipts and deposits in office account ........................................................................................ 30
Office account cash book............................................................................................................... 30
Office account ledger ..................................................................................................................... 30
Payments from office account ....................................................................................................... 30
Recording cheques ........................................................................................................................ 32
Office records ................................................................................................................................. 32
Recording office account receipts .................................................................................................. 32
Office transaction list for July ......................................................................................................... 33
Understanding office accounts and maintaining records ............................................................... 34
Transaction list for August ............................................................................................................. 34
Answers ......................................................................................................................................... 37
Section 5: Charging legal fees, paying from trust, preparing statements ..................................... 42
Preparing accounts ........................................................................................................................ 42
Preparing bills of costs ................................................................................................................... 43
Recording costs ............................................................................................................................. 44
Transfer of funds from trust to office .............................................................................................. 44
Trust account statement ................................................................................................................ 45
Answers ......................................................................................................................................... 47
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Section 6: Maintaining records of other trust money ....................................................................... 53
Categories of trust money .............................................................................................................. 53
Transit money ................................................................................................................................ 53
Investment money.......................................................................................................................... 53
Answers ......................................................................................................................................... 55
Section 7: Preparing monthly reports ................................................................................................ 58
Balancing the cash book ................................................................................................................ 58
Reconciliation with ledger .............................................................................................................. 59
ADI reconciliation – trust ................................................................................................................ 60
Investment money.......................................................................................................................... 62
Office account ................................................................................................................................ 63
Office reconciliation with ledger ..................................................................................................... 64
Monthly reports .............................................................................................................................. 67
Answers ......................................................................................................................................... 68
Section 8: Complying with further statutory requirements ............................................................. 73
Prescribed account ........................................................................................................................ 73
Conclusion ..................................................................................................................................... 73
Answers ......................................................................................................................................... 74
Section 9: Additional documents ....................................................................................................... 75
Blank trust account primary records .............................................................................................. 75
Blank office account primary records ............................................................................................. 77
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Introduction
All Practice Management Course (PMC) participants are required to complete a Trust Accounting Workbook (your
Workbook), which involves completing appropriate trust accounting records for different scenarios.
In addition to this Questions and Exercises booklet, you have also been provided with a Workbook of blank
records.
You are required to work through this Questions and Exercises booklet:
 answering the questions in each section
 completing the separate Workbook as indicated.
At the end of each section, there will be an opportunity to check your answers and completed records.
To demonstrate completion of the task, you are required to submit your completed Workbook document to
[email protected] within 10 working days of the final PMC workshop day (you are not required to submit this
Questions and Exercises booklet).
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Section 1: Recognising trust and other money
1.1
Recognising trust money
To recognise whether trust money has been received, you must know and understand the relevant provisions of
the Legal Profession Act 2007 (the Act).
You will need to refer to s 237 of the Act as you work through this section.
Look carefully at the definition of ‘trust money’ in s 237(1) of the Act. To decide if certain money is trust money,
you must ask four questions:
1. Has ‘money’ been entrusted to a law practice?
2. Has money been ‘entrusted’ to a law practice?
3. Has money been entrusted to a ‘law practice’?
4. Has money been entrusted to a law practice ‘in the course
of or in connection with the provision of legal services’?
See the table below for guidance:
Money
The term ‘money’ is not defined in the Act, but it does include cash and cheques.
Entrusted
The term ‘entrusted’ is not defined in the Act, but its use reinforces that trust money is
placed in a practice’s ‘care and protection’: Queensland Law Society Trust Accounting
Guide, page 8.
Law practice
The term ‘law practice’ is defined in Schedule 2 of the Act to mean:
 an Australian legal practitioner who is a sole practitioner
 a law firm
 an incorporated legal practice; or
 a multidisciplinary partnership.
The term ‘law firm’ is defined in Schedule 2 and the term ‘Australian legal practitioner’ is
defined in s 6.
Legal services
The term ‘legal services’ is defined exhaustively in Schedule 2 of the Act as work done,
or business transacted, in the ordinary course of legal practice.
If a practitioner is treasurer of a local sporting club and receives money as such, the
money is not received ‘in the course of or in connection with the provision of legal
services’. If the practitioner is instructed to act for the club, and receives money as
practitioner, that money would be entrusted to a law practice ‘in the course of or in
connection with the provision of legal services’.
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1.2
Recognising trust funds
There are different types of trust money, as outlined in the table below:
Trust money
‘Trust money’ is defined in s 237(1) as money entrusted to a law practice in the course of
or in connection with the provision of legal services by the practice. It includes money
received in advance of providing legal services, transit money, controlled money and
power money.
Trust money received in the form of cash must be deposited to the general trust account
or a controlled money account: ss 255(1) and (3). All other trust money must be either
deposited to the general trust account or dealt with according to whether it is written
direction money, controlled money, transit money or power money: s 248(1)
Transit money
‘Transit money’ is defined by s 237(1) to mean money received by the practice subject to
instructions to pay or deliver it to a third party, other than an associate of the practice.
Pursuant to s 253(1), the practice must pay or deliver the money within the time period
specified in the instructions or, if no time is specified, as soon as practicable after its
receipt.
Cash cannot be treated as transit money. Rather, the cash must be deposited to the
general trust account or a controlled money account: ss 255(4) and (3).
The practice must keep brief particulars of the transaction and the purpose for which the
transit money was received: s 52(2) of the Legal Profession Regulation 2007 (the
Regulation). Copies of the transit money cheques received and any directions in respect
of them should be retained.
Controlled
money
‘Controlled money’ is defined by s 237(1) as money received or held by the practice for
which it has a written direction to deposit the money in an account, other than a general
trust account, over which the practice has or will have exclusive control, eg an interest
bearing account: s 255(3).
Power money
Power money refers to trust money that is the subject of a power given to the practice or
an associate. Such money must be dealt with only under the power relating to the money:
s 254(1). Examples include a power of attorney, guardianship order or an authority to
sign on a person’s bank account.
Trust money that is received in the form of cash and is the subject of a power must be
deposited in the general trust account or a controlled money account before the money is
deposited to an account maintained by the practice or associate pursuant to the power: s
255(5).
The practice must keep a record of all dealings with the money to which the practice or
associate is a party, together with all supporting information, for seven years: s 56(2) of
the Regulation. It must also maintain a register of powers and estates in respect of which
the practice or an associate is acting, either alone or jointly with the practice or one or
more associates, in relation to trust money s 57(1).
A separate trust account statement must be furnished for each record: s 53(4). It will
contain particulars of the information required to be kept in relation to the power money
account and the balance (if any) of the money.
Written direction
money
Money received subject to a written direction (other than cash) from an appropriate
person must be dealt with in accordance with the direction within the time period specified
in the direction or, if no time specified, as soon as practicable after it is received: ss
248(1)(a) and (2). An ‘appropriate person’ is defined in s 248(4) as a person legally
entitled to give the law practice directions in relation to dealings with the trust money.
Cash cannot be treated as written direction money. Rather, the cash must be deposited
to the general trust account or a controlled money account: ss 255(2) and (3).
The practice must keep a written direction for seven years after finalisation of the matter
to which the direction related: s 36 of the Regulation.
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Q1/1 A client is going overseas and gives the practitioner a power to operate the client’s bank account so that the
practitioner will have quick access to the client’s funds when needed for settlement of a purchase.
Has trust money been received? If so, which type?
1.
No receipt of trust money.
2.
Receipt of transit money.
3.
Receipt of general trust money.
4.
Receipt of investment money.
5.
Receipt of power money.
Q1/2 A client, purchasing a new home, gives a cheque for the deposit, drawn in favour of the agent, to the
practitioner to forward it immediately to the agent as provided in the contract.
Has trust money been received? If so, which type?
1.
No receipt of trust money.
2.
Receipt of transit money.
3.
Receipt of trust account money.
4.
Receipt of investment money.
5.
Receipt of controlled money.
Q1/3 Mary Ilic is executor and trustee of her late father’s estate. She is an employed practitioner in a law practice.
Is money received by her for the estate trust money?
1.
The money will never be trust money – the practitioner is acting purely as a private individual.
2.
The money will always be trust money – as she is a practitioner and receiving money.
3.
The money may be trust money – if the practitioner is acting as a private individual but her firm is acting for
the estate.
4.
The money will only be trust money if the practitioner is acting as practitioner for the estate.
Q1/4 A client gives you a cheque to cover your professional fees in a matter. Is it:
1.
trust money; or
2.
office money
1.3
Dealing with trust money
At 4pm, a practitioner receives a cheque from a client for $15,000 on account of stamp duty ($13,000) and other
anticipated disbursements. The next day, the practitioner banks the cheque into the general trust account of the
law practice, in which the practitioner is a partner.
Q1/5 Which of the following statements is correct?
1.
Provided the necessary records have been completed, the practitioner has handled the cheque
appropriately.
2.
Even if the necessary records have been completed, the practitioner has not handled the cheque
appropriately.
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The day after the cheque was banked into the law practice’s trust account, the practitioner draws a trust cheque for
$13,000 payable to the Office of State Revenue for stamp duty on the contract.
Q1/6 Has the practitioner complied with the Act?
1.
The practitioner has complied with the Act because the trust money was received for that purpose.
2.
The practitioner has not complied with the Act because until the funds have been cleared by the financial
institution, the law practice is drawing against other clients’ funds.
3.
In order to comply with the Act, the practitioner would need to have arranged a special clearance with the
bank.
Jack Bush, an employed practitioner, receives a cheque from a client on account of costs and disbursements in a
civil litigation matter. Three days later, Jack banks the cheque into the law practice’s general trust account and
signs a trust cheque payable to counsel for counsel’s fees.
Q1/7 Think of at least three ways Jack appears to have breached the Act and Regulation.
1.
………………………………………………………………………………………………………………………………
2.
………………………………………………………………………………………………………………………………
3.
………………………………………………………………………………………………………………………………
1.4
Maintaining records
Section 261(1) of the Act and s 59(1) of the Regulation requires the keeping in permanent form of trust records in
relation to trust money received by the practice. The records must be kept in a way that discloses the true position
in relation to trust money received for any person and also enables the records to be conveniently and properly
investigated or externally examined: s 261(1).
What does this mean in practice?
Q1/8 Where must such records be maintained?
………………………………………………………………………………………………………………………………………
Q1/9 Can they be maintained in a language other than English?
………………………………………………………………………………………………………………………………………
Q1/10 Is there any restriction on using a computer system to maintain them?
………………………………………………………………………………………………………………………………………
Q1/11 How long must they be retained for?
………………………………………………………………………………………………………………………………………
Q1/12 What ‘trust records’ must you maintain?
………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………
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1.5
Answers
Recognising trust funds
Q1/1 The correct answer is 5: receipt of power money.
1. Incorrect. Even though no specific sum has been received, the definition of ‘trust money’ in s 237(1)
includes money that is the subject of a power, exercisable by the practice or an associate, to deal
with the money for another person.
2. Incorrect. No cheque has been received.
3. Incorrect. No money is to be banked into a trust account.
4. Incorrect. The money is not to be invested by the solicitor.
5. Correct. The definition of ‘trust money’ in s 237(1) includes money that is the subject of a power,
exercisable by the practice or an associate, to deal with the money for another person.
Q1/2 The correct answer is 2: receipt of transit money.
1. Incorrect. Money has been entrusted to the practice in the course of or in connection with the provision of legal
services by the practice (see definition of ‘trust money’: s 237(1)). This is transit money. The practitioner is not
required to pay it into a trust account provided it is given immediately as required by the instruction relating to
the money pursuant to s 253(1).
2. Correct. The trust money consists of a cheque drawn in favour of someone else, who is lawfully entitled to it
and the cheque is to be forwarded as required by the instruction relating to the money pursuant to s 253(1).
3. Incorrect. The money is not to be banked into a trust account by the law practice provided it is given as required
by the instruction relating to the money pursuant to s 253(1).
4. Incorrect. The money is not to be banked into a trust account or invested by the law practice provided it is given
as required by the instruction relating to the money pursuant to s 253(1).
5. Incorrect. The practitioner is not authorised to operate an account in the name of the client: see definition
of ‘controlled money’: s 237(1).
Recognising trust money
Q1/3 The correct answer is 3: the money may be trust money – if the practitioner is acting as a private individual
but her firm is acting for the estate.
1. Incorrect. Money from the estate will be trust money if received in the course of practice as a practitioner.
2. Incorrect. Money from the estate may not be trust money if Mary is acting purely as a private individual.
3. Correct. Mary is an associate of the law practice: s 7(1)(a)(v) definition of ‘associate’. Money is deemed to be
received by the law practice if received by an associate: s 242(1)(b). If Mary gives money to the law practice
to bank, it will be trust money. If, however, Mary opens an estate account at a bank with herself as signatory as
executor/trustee and not in connection with, or under the control of, the practice, the money will not be trust
money.
4. Incorrect. If Mary is acting as practitioner for the estate, the money will certainly be trust money but the money
may also be trust money if someone else in the law practice acts for the estate.
Q1/4 The correct answer will depend on when the client paid you.
 If you had already completed the work and issued a bill to the client, you could bank the cheque direct to your
office account. It is not to be held ‘on behalf of’ the client.
 If, however, the client gave you the cheque in anticipation of work you were yet to do, the money is received
‘on behalf of’ the client and must be paid into a trust bank account.
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Dealing with trust money
Q1/5 The correct answer is 1: provided the necessary records have been completed, the practitioner has handled
the cheque appropriately.
Trust money has been received. Although the practitioner has not banked the cheque on the same day as
it was received, it appears to have been banked as soon as practicable: s 248(1) of the Act.
Q1/6 The correct answers are 2 and 3.
 The practitioner has not complied with the Act because until the funds have been cleared by the financial
institution, the law practice is drawing against other clients’ funds.
 In order to comply with the Act, the practitioner would need to have arranged a special clearance with the bank.
Even though the money was received for that purpose, a law practice does not have control of the funds until such
time as the funds have been cleared by the financial institution, thus enabling the law practice to debit an amount to
an account. Without a special clearance, the practitioner would, in effect, be drawing against the trust money of
another client. See the definition of ‘trust money’ in s 237 of the Act, and the definition of ‘when money is received’
in ss 242(1) and (2). If the client’s cheque is dishonoured, there will be a deficiency in the client’s trust ledger
account; and an offence under s 259(1).
Q1/7 Jack appears to have breached the Act/Regulation in the following ways:
1. Unless the cheque was received on a Friday or there were exceptional circumstances, Jack has breached
s 248(1) by not banking the cheque by the next banking day.
2. Unless Jack had arranged with the bank for a special clearance, the cheque received from the client would
not be cleared funds. Jack would then, in effect, be drawing against the trust money of some other client and
therefore be in breach of s 259(1).
3. If Jack has not kept records of the transactions, he has breached s 261 of the Act and s 59(1) of the Regulation.
4. There is also a breach of s 37(3) of the Regulation unless Jack has been authorised to sign trust cheques.
5. The law practice must make out a receipt for the trust money: s 34 of the Regulation.
6. The law practice must make out a deposit record: s 35 of the Regulation.
Maintaining records
Q1/8 No specific requirement.
There is no specific requirement under the Act or the Regulation. However, the records are normally kept at the
practice’s sole or principal place of business.
Q1/9 No.
According to the definition of ‘permanent form’ in s 237, the records must be in English.
Q1/10 Yes. Restrictions apply.
Any such system must comply with ss 29-32 of the Regulation.
Q1/11 Not less than seven years: s 59 of the Regulation.
Q1/12 ‘Trust records’ is defined in s 237(1) to include the following documents:
 Receipts.
 Cheque butts or requisitions.
 Authorities to withdraw by EFT.
 Deposit records.
 Trust account ADI statements.
 Trust account receipts and payments cash books.
 Trust ledger accounts.
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 Monthly trial balances.
 Monthly reconciliations.
 Trust transfer journals.
 Statements of account required to be given under the Regulation.
 Register required to be kept under the Regulation.
 Monthly statements required to be kept under the regulation.
 Files relating to trust transactions and/or bills of costs.
 Written directions and authorities.
 Supporting information in relation to powers to deal with trust money.
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Section 2: Completing primary records
2.1
Primary records
The Act is very specific about the detail which must be included on primary records (source documents).
You must be familiar with the requirements and able to comply with them.
Throughout this subject, we will assume you are a partner in a new law practice, Law & Co, and we will work
through some transactions of that practice. You may assume for these transactions that the responsibilities
for client agreements have been complied with.
On 21 July 20XX, you received your first instruction to act for Adrian Chappell on his purchase of a house
at Bardon from C Thomson for $415,000. You assign matter number A1.
He handed you a bank cheque (from St George Bank, Brisbane City) for $14,000 on account of costs
and disbursements including stamp duty ($13,000).
Q2/1 Has trust money been received?
No receipt of trust money.
1. Receipt of transit money.
2. Receipt of trust account money.
3. Receipt of investment money.
4. Receipt of controlled money.
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2.2
Writing receipts
What are you required to do now? As soon as practicable, preferably the same day, you must complete a trust
receipt in accordance with s 34 of the Regulation and bank the money, retaining a bank deposit record: s 35 of the
Regulation.
Q2/2 Check the notes below relating to different sections of the receipt to check the requirements and then
complete receipt number 118201 on page 3 of your Workbook.
118201
Law & Co etc
A trust receipt must be in duplicate
(s 34(4) of the Regulation), numbered
consecutively and issued in
consecutive order: s 34(7) of the
Regulation.
A trust account receipt must contain
the name of the law practice:
s 34(5)(g) of the Regulation.
21 July 20XX
L AW & CO
118201
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
21 July 20XX
TRUST ACCOUNT RECEIPT
Received from:
The date the receipt is made out is
entered here: s 34(5) of the
Regulation.
The date the funds were actually
received by the law practice: s 34(5) of
the Regulation.
on:
the sum of:
Adrian Chappell
dollars and
cents $
The name of the person you received
the money from is entered here:
s 34(5)(d) of the Regulation.
cheque/cash
Fourteen thousand dollars/$14,000
for and on behalf of:
(client name)
(matter description and matter reference)
The amount of money you have
received is entered in words and
figures: s 34(5)(b) of the Regulation.
for:
Adrian Chappell
Made out by:
on behalf of:
Law & Co
Solicitors
Trust Account
Your client’s name (the person on
whose behalf the money is received) is
entered here. Remember that the
person from whom the money is
received is not always the same as the
person on whose behalf it is received:
s 34(5)(e) of the Regulation.
A Student
The name of the person issuing the
receipt is written here: s 34(5)(h) of the
Regulation. Although s 34 of the
Regulation only requires the name to
be recorded, it should also be signed.
Purchase of house at Bardon from Thomson (A1) on account
of costs and disbursements including stamp duty ($13,000)
A brief description of the matter and matter reference for
which the moneys are received is required by s 34(5)(e) and
(f) of the Regulation – you should record the type of
matter/name of the other party (if possible) and purpose for
which these moneys are received.
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2.3
Trust account deposit form
The next document to be completed is the bank deposit form, also known as the deposit slip. Such a form must be
completed in duplicate. It is produced to the bank when the deposit is made and the bank retains a copy. You
should ensure the bank stamps your copy as evidence of the deposit.
Q2/3 In your Workbook, complete a bank deposit form on page 5.
$14,000
21 July 20XX
Fourteen thousand dollars
The total amount of the deposit must
be shown: s 35(3)(b) of the
Regulation.
Show the breakdown of
cheques, notes and coins:
s 35(3)(c) of the Regulation.
The date of the deposit must be
recorded: s 35(3)(a) of the
Regulation.
Signature of person who takes
the cheque to the bank
THE SUM OF
NOTES
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
(signature)
CHEQUES
as herein
LAW & CO
TRUST ACCOUNT
Account No
TOTAL
$
123 456 789
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
BANK
PLACE
A MO U N T
REC NO
1
2
3
4
5
Law & Co
The firm name is entered here, not
the name of the client. The account
number is the bank account number
for the firm trust account.
In both ‘drawer’ and ‘bank’ boxes, write St George; in
‘place’ box Brisbane City; in ‘amount’ box $14,000.
Write 118201 in the ‘Rec no’ column. The number of
the trust account receipt should be recorded.
For each cheque deposited, show the name of the
drawer, bank, branch or BSB number and amount.
Note that the drawer of a personal cheque is the
person whose account it is. The drawer of a bank
cheque is the bank: s 35(3)(d) of the Regulation.
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2.4
Writing receipts and bank deposit records
On 23 July, your partner, Morgan Smith, was instructed to appear at the Holland Park Court for Joshua Drake ats
Police, a DUI charge, matter number A2. He received a personal cheque from Drake (drawn on the National,
Carina) for $440 on account of professional fees.
Q2/4 In your Workbook, complete receipt number 118202 on page 3 and a bank deposit form on page 5.
On 24 July, you received instructions from Daphne Fisher to advise her in relation to the estate of the late T Fisher,
matter number A3. She instructed you to obtain counsel’s opinion as her agent and gave you a personal cheque
(drawn on CBA, Ascot) for $950 on account of costs and disbursements.
She also instructed you to act for her on the purchase of a unit at Wishart from J & D Greig for $320,000, matter
number A4. She gave you another cheque for $11,000 for stamp duty and on account of costs and disbursements.
Q2/5 In your Workbook, complete receipt numbers 118203 and 118204 on page 4 and a bank deposit slip
on page 6.
2.5
Writing cheques
For the following exercises, cheques may be treated as cleared the day after they are banked, although in practice,
you need to check with your financial institution how long you must allow.
On 24 July, following the receipt of the Chappell/Thomson contract signed by the vendor, you paid the Office of
State Revenue $13,000 for stamp duty on the contract.
Review the notes below and then complete cheque number 41001 on page 7 of your Workbook.
BANK
41001
BANK
Date
Pay
Payee
the sum of
or order
Detail
Law & Co
LAW PRACTICE
TRUST ACCOUNT
Not
Negotiable
$
Chq $
“•41001 ‘•082’”000•’123’456789”•
41001
Pay ...The Office of State Revenue
 A trust cheque must be to a named payee and have a direction to pay to, or to the order of: s 37(2)(a) of the
Regulation.
The sum of …Thirteen thousand dollars/$13,000
 If words and figures do not match, the cheque is a cheque for the lesser amount.
Law Practice Trust Account …Law and Co/A Student
 A trust cheque must have on it the name of the law practice and the expression “law practice trust account”: s
37(2)(c) of the Regulation.
 A trust cheque must be signed by an authorised principal or another practitioner as specified by s 37(3) of the
Regulation.
 A trust cheque must have a crossing “not negotiable”: s 37(2)(b) of the Regulation.
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Stub/record: a record must be kept of:
 The date the cheque is drawn: s 37(6)(a) of the Regulation.
 The name of the person to whom the cheque is made payable: s 37(6)(c) of the Regulation.
 The name of the person, and a brief description of the matter, for which the cheque is drawn: s 37(6)(d),
(e) and (f). The purpose of the particular payment must also be noted.
 The amount withdrawn: s 37(6)(b) of the Regulation.
Also on 24 July, you paid College Searchers $340 for searches with regard to the property being
purchased by Chappell.
Q2/6 Complete the cheque and butt number 41002 on page 7 of your Workbook.
2.6
Trust transaction list for July
If you would like more practice in writing trust cheques and receipts, below is the trust transaction list for July of all
transactions recorded in the trust account cash book (from page 8) and trust account ledger (from page 15) of your
Workbook. You may find it helpful to read through the transactions not already considered in this section and
check how each has been recorded. Go to the Additional documents section at the end of this booklet (page 75)
and use the templates provided to write the primary records (source documents) for the balance of the transactions
listed there.
(a)
On 21 July 20XX, you received your first instruction to act for Adrian Chappell on his purchase of a house at
Bardon from C Thomson for $415,000. He handed you a bank cheque (from St George Bank, Brisbane City)
for $14,000 on account of costs and disbursements, including stamp duty ($13,000).
(b)
On 23 July 20XX, your partner, Morgan Smith, was instructed to appear at the Holland Park Court for Joshua
Drake ats Police, a DUI charge. He received a personal cheque from Drake (drawn on NAB, Carina) for
$440 on account of costs.
(c)
On 24 July 20XX, following receipt of the Chappell/Thomson contract signed by the vendor, you paid the
Office of State Revenue $13,000 for stamp duty on the contract. Also on 24 July 20XX, you paid College
Searchers $340 for searches with regard to the property being purchased by Chappell.
(d)
On 24 July 20XX, you received instructions from Daphne Fisher to advise her in relation to the estate of the
late T Fisher. She instructed you to obtain counsel’s opinion as her agent and gave you her personal
cheque (drawn on CBA, Ascot) for $950 on account of costs and disbursements.
(e)
On the same date, Daphne Fisher also instructed you to act for her on the purchase of a unit at Wishart from
J & D Greig for $320,000. She gave you another cheque for $11,000 for stamp duty and on account of costs
and disbursements.
(f)
On 25 July 20XX, you received instructions from Malcolm Murray to sue J Brescia for damages for personal
injuries and you received from Murray a cheque for $1,000 on account of costs and disbursements. Mr
Murray also gave you preliminary instructions on a proposed purchase from Nguyen.
(g)
On 28 July 20XX, upon Mr Murray's instructions and as his agent, his cheque to you having cleared, you
paid to Ms A Phillips of counsel $385 for a special retainer for Murray's case against Brescia.
(h)
On 29 July 20XX, you filed in the District Court, as agent for Murray, a Statement of Claim against Brescia
for $45,000, paying the filing fee of $388.
(i)
On the same day, as directed by A Chappell and as his agent, you paid College Surveyors $297 for a survey
report on the property being purchased by him and Brisbane City Council $110 for an additional certificate.
(j)
Also on 29 July 20XX, you received instructions from Joseph Payne and Victor Sanders with regard to a
proposed purchase of new offices from Ang. They handed you a cheque for $1,000 on account of costs and
disbursements.
(k)
On 31 July 20XX, you received instructions from Joseph Payne and Victor Sanders to incorporate a
company under the name of Chandos Real Estate Pty Limited. They decided not to proceed with the
purchase. You made no charge for your preliminary advice in that matter and later that day, they gave you
written directions to use the money already held for the purchase on account of costs and disbursements in
the new matter.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 16 of 78
2.7
Answers
Primary records
Q2/1 The correct answer is 3: receipt of trust account money.
Money has been received by the practice on account of legal costs in advance of providing legal services: s 237(1)
definition of ‘trust money’. It must be paid as soon as practicable into a trust account: s 248(1).
Q2/2 The completed receipt is shown here.
L AW & CO
118201
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT RECEIPT
21/07/20XX
Received from: Adrian Chappell
on: 21/07/20XX
the sum of: Fourteen thousand---
dollars and
cents $14,000.00---
cheque/cash
for and on behalf of: Adrian Chappell
(client name)
Purchase of house at Bardon from Thompson (A1)
(matter description and matter reference)
for: On account of costs and disbursements including stamp
duty ($13,000)
Made out by: A Student
on behalf of:
Law & Co
Solicitors
Trust Account
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 17 of 78
Trust account deposit form
Q2/3 See below the completed bank deposit record.
21/07/20XX
THE SUM OF
NOTES
Fourteen thousand dollars---
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
A Student
(signature)
CHEQUES
as herein
$14,000
00
TOTAL
$14,000
00
LAW & CO
TRUST ACCOUNT
Account No
123 456 789
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
1
St George
BANK
St George
PLACE
Brisbane City
A MO U N T
14,000.00
REC NO
118201
2
3
4
5
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 18 of 78
Writing receipts and bank deposit records
Q2/4 See the completed receipt and bank deposit records below.
L AW & CO
118202
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT RECEIPT
23/07/20XX
Received from: Joshua Drake
on: 23/07/20XX
the sum of: Four hundred and forty---
dollars and
cents $440.00---
cheque/cash
for and on behalf of: Joshua Drake
(client name)
ats Police(A2)
(matter description and matter reference)
for: On account of professional fees
Made out by: A Student
on behalf of:
Law & Co
Solicitors
Trust Account
23/07/20XX
THE SUM OF
NOTES
Four hundred and forty dollars---
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
A Student
(signature)
CHEQUES
as herein
$440
00
TOTAL
$440
00
LAW & CO
TRUST ACCOUNT
Account No
123 456 789
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
1
J Drake
BANK
National
PLACE
Carina
A MO U N T
440.00
REC NO
118202
2
3
4
5
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 19 of 78
Q2/5 See the completed receipts and bank deposit records below.
L AW & CO
118203
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT RECEIPT
24/07/20XX
Received from: Daphne Fisher
on: 24/07/20XX
the sum of: Nine hundred and fifty---
dollars and
cents $950.00---
cheque/cash
for and on behalf of: Daphne Fisher
(client name)
Estate of the late T Fisher (A3)
(matter description and matter reference)
for: On account of costs and disbursements
Made out by: A Student
on behalf of:
Law & Co
Solicitors
Trust Account
L AW & CO
118204
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT RECEIPT
24/07/20XX
Received from: Daphne Fisher
on: 24/07/20XX
the sum of: Eleven thousand---
dollars and
cents $11,000.00---
cheque/cash
for and on behalf of: Daphne Fisher
(client name)
Purchase from J & D Greig of home unit at Wishart (A4)
(matter description and matter reference)
for: Stamp duty and on account of costs and disbursements
Made out by: A Student
on behalf of:
Law & Co
Solicitors
Trust Account
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 20 of 78
24/07/20XX
THE SUM OF
NOTES
Eleven thousand nine hundred and fifty dollars---
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
A Student
(signature)
CHEQUES
as herein
$11,950
00
TOTAL
$11,950
00
LAW & CO
TRUST ACCOUNT
Account No
123 456 789
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
BANK
PLACE
A MO U N T
REC NO
1
D Fisher
CBA
Ascot
$950.00
118203
2
D Fisher
CBA
Ascot
$11,000.00
118204
3
4
5
Writing cheques
Q2/6 The completed cheque and butt are shown here.
BANK
41002
BANK
24/07/20XX
Date 24/07/20XX
Pay College Searchers
Payee College Searchers
the sum of Three hundred and forty dollars---
or order
Detail Searches for Chappell
Purchase from Thomson (A1)
Law & Co
LAW PRACTICE
TRUST
Not
Negotiable
$ 340.00---
A Student
ACCOUNT
Chq $ 340.00
“•41002 ‘•082’”000•’123’456789”•
41002
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 21 of 78
Section 3: Understanding secondary records
3.1
Secondary records
In this section, you will need to use your Workbook.
You will recall in a previous section that the first trust money received by law practice, Law & Co, was from Adrian
Chappell on 21 July 20XX. Trust receipt 118201 and a bank deposit form were completed.
Particulars from them must be recorded in certain secondary records.
Q3/1 What are those records called?
1. Receipt cash book.
2. Ledger.
3. Journal.
3.2
Receipts cash book
Let’s look first at the cash book. Remember receipts and payments are recorded separately in the cash book.
Turn to page 8 of your Workbook – this is the initial page of the trust account cash book.
Section 40 of the Regulation requires a record here of the particulars on each receipt, together with the date of
each deposit.
See the table on the next page to find out the requirements for each column of the cash book.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 22 of 78
Trust account receipts cash book
The date of receipt and, if
different, the date the funds
were received, is required by
s 40(1)(a) of the Regulation.
Cheque was received from
Mr Chappell on 21 July
20XX. The year and month
entered at the top apply for
the whole page.
DATE OF
RECEIPT
20XX
Show both the name of the
person on whose behalf the
money is received, Adrian
Chappell, and details of the
matter, from Thomson
purchase at Bardon (A1):
s 40(1)(f) of the Regulation.
Matters are usually described
by type of matter and/or other
party.
RECEIPT CLIENT NAME, MATTER REFERENCE
NO
AND MATTER DESCRIPTION
July
11820 -
21
1
CHAPPELL from THOMSON
Purchase at Bardon
File A1
Trust receipts must be
consecutively machine
numbered: s 34(7) of the
Regulation. For long receipt
numbers, it is common to
record the prefix at the top, to
apply to the whole page.
Enter here particulars
sufficient to identify the
purpose for which the money
is received: s 40(1)(g) of the
Regulation. Abbreviations
should not be used on a
receipt but may be used in
secondary records as per
below.
RECEIVED
FROM
PURPOSE FOR
RECEIPT
Adrian
Chappell
On a/c of c/d incl
stamp duty
The name of the person you
received the money from is
entered here: s 40(1)(e) of
the Regulation. It is not
always the same as the
person on whose behalf the
money was received.
The form in which the money
was received must be
recorded: s 40(1)(d) of the
Regulation.
POSTED
TO
LEDGER
CHQ/
CASH

Bank chq
Particulars must be posted to
(recorded in) the ledger
account within five working
days of receipt/payment:
s 42(9) of the Regulation.
Tick this column when
posting completed.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
AMOUNT ON
RECEIPT AND
FOR LEDGER
$
14,000.00
You must indicate the
amount of money received
from the matter: s 40(1)(c) of
the Regulation. It will not be
the same as the amount on
the bank deposit slip if the
money for different matters is
banked.
This information comes from
the bank deposit form. It will
not always be the same
figure as is on the receipt. If
amounts for different matters
are banked using one deposit
slip, only record the total
figure once in this column.
BANKING TOTAL
ON DEPOSIT
SLIP
$
14,000.00
BANKING
DATE ON
DEPOSIT
SLIP
21/7
This information comes from
the bank deposit form. It will
not be the same as the date
on the receipt if the money is
not banked the day it is
received. Remember that
trust moneys must be banked
daily or as soon as
reasonably practicable:
s 248(1) of the Act.
Page 23 of 78
3.3
Ledger
The entry having been completed in the cash book, you now go to the ledger (page 15 of your Workbook).
The ledger is made up of separate ledger accounts for each matter. Pursuant to s 42 of the Regulation, each
ledger account must include the following:
 The name and address of the person on whose behalf the money is held. Usually that is your client – in this
case, Adrian Chappell.
 A brief description of the matter: Purchase from Thomson of house at Bardon (A1).
 Particulars of each transaction, including:
(a) the matter reference: A1
(b) the date: 21 July
(c) from whom moneys received or to whom paid: Adrian Chappell
(d) brief description of the matter for which received that is the purpose of this particular receipt or payment:
On a/c of c/d incl stamp duty
(e) the amount of the transaction – because it is a receipt of money, it is recorded in the credit column: CR
14,000.00
(f)
receipt, cheque or journal folio number: 118201
(g) the resulting current balance of the ledger account – this is shown in the last two columns: CR 14,000.00.
In the column headed DR/CR, you must show whether the balance is a debit or credit. A client’s trust
ledger account should never have a DR balance.
See below to the ledger account entry for Chappell.
Trust account ledger
NAME:
ADDRESS:
MATTER REFERENCE:
MATTER DESCRIPTION:
DATE 20XX
July
21
Adrian Chappell
105 Essex St, Richmond
A1
Purchase from Thomson of house at Bardon
RECEIVED
FROM OR PAID
TO
PURPOSE
From Adrian
Chappell
On a/c of c/d
incl stamp duty
RECEIPT/
CHEQUE/
JNL NO
118201
DR
$
CR
$
14,000
DR/
CR
00
CR
BALANCE
$
14,000
00
The next transaction for Mr Chappell was the payment of stamp duty to the Office of State Revenue.
Q3/2 After the cheque and butt were completed, where did the transaction need to be recorded?
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 24 of 78
3.4
Payments cash book
Sections 39 and 41 of the Regulation require a record in the payments cash book of the particulars of each payment.
See the table below to find out the requirements.
Trust account payments cash book
Show both the name of the
person on whose behalf the
money is drawn and details
of the matter: s 41(1)(d) of
the Regulation. Matters are
usually described by type of
matter and/or other party.
The date and number of
payment is required by
s 41(1)(a) of the Regulation.
The year and month entered
at the top apply for the whole
page.
DATE OF
PAYMENT
20XX
CHEQUE
NO
July
410 -
24
01
CLIENT NAME, MATTER REFERENCE AND
MATTER DESCRIPTION
CHAPPELL from THOMSON
Purchase at Bardon
File A1
Payment from the general
trust account must only be by
cheque or EFT (if authorised
by the Society): s 250(1) of
the Act. For long cheque
numbers, it is common to
record the prefix at the top, to
apply to the whole page.
Record here particulars of
the purpose for which the
cheque was drawn: s 41(1)(f)
of the Regulation. Trust
money must be used as
directed: s 249(1)(b) of the
Act.
You must indicate the
amount to be debited against
this ledger account – usually
it is the amount for which the
cheque was drawn:
s 41(1)(b) of the Regulation.
PAYEE
PURPOSE FOR
PAYMENT
POSTED TO
LEDGER
Office of State
Revenue
Stamp duty on
contract

Record the name of the
person or company in whose
favour the cheque is drawn:
s 41(1)(c) of the Regulation.
A trust cheque must be
crossed, marked ‘not
negotiable’ and payable to
order: s 37(2) of the
Regulation.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
AMOUNT FOR
LEDGER
$
Particulars must be posted to
(recorded in) the ledger
account within five working
days of receipt/payment:
s 42(9) of the Regulation.
Tick this column when
posting complete.
13,000.00
TOTAL AMOUNT
ON FACE OF
CHEQUE
$
13,000.00
If trust money is to be paid to
the same payee but for
different matters, it is
possible to draw one cheque
for all, provided that full
details are recorded with
regard to each matter – in
that case, in this column, just
record the total of the cheque
once.
Page 25 of 78
3.5
Ledger
Once the transaction is entered in the cash book, it must be posted to (recorded in) the ledger (page 15 of your
Workbook).
See below the next entry required.
Trust account ledger
NAME:
ADDRESS:
MATTER REFERENCE:
MATTER DESCRIPTION:
RECEIVED
FROM OR PAID
TO
PURPOSE
21
From Adrian
Chappell
On a/c of c/d
incl stamp duty
118201
24
To OSR
S/duty on
contract
41001
DATE 20XX
July
Adrian Chappell
105 Essex St, Richmond
A1
Purchase from Thomson of house at Bardon
RECEIPT/
CHEQUE/
JNL NO
DR
$
CR
$
14,000
13,000
DR/
CR
00
00
BALANCE
$
CR
14,000
00
CR
1,000
00
Particulars of the payment must be shown to comply with s 42 (5) of the Regulations as follows:
 The date: 24 July
 To whom paid: To Office of State Revenue
 A brief description of the matter for which received, that is the purpose for this particular payment: Stamp duty
on contract
 Particulars sufficient to identify the originating trust record, in this case, the cheque number: 41001
 The amount of the transaction – because it is a payment of money, it is recorded in the debit column: DR
13,000.00
 The resulting current balance of the ledger account – this is shown in the last two columns: CR 1,000.00. To
reach the current balance, you must deduct the amount of the cheque ($13,000) from the amount previously
held for Mr Chappell ($14,000) – the balance $1,000 is still a credit balance as you still hold that amount for him.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 26 of 78
3.6
Trust transfer journal
On July 29, you received instructions from Joseph Payne and Victor Sanders with regard to a proposed purchase
of new office from Ang, matter number A7. They handed you a cheque for $1,000 on account of costs and
disbursements.
Look at pages 8 and 18 of your Workbook to see how receipt of that cheque has been recorded in both the trust
cash receipts book and trust ledger account for that matter.
On 31 July, you received further instructions from Payne and Sanders to incorporate a company under the name
Chandos Real Estate Pty Limited. They decided not to proceed with the purchase. You made no charge for your
preliminary advice in that matter and later that day they gave you written directions to use the money already held
for them for the purchase on account of costs and disbursements in the new matter.
You will recall that a new ledger account must be opened for each matter: s 42(1) of the Regulation.
Q3/3 Where should the transfer of trust funds from one trust ledger account to another be recorded? Select your
responses from the list below:
1. Trust account receipts cash book.
2. Trust account payments cash book.
3. Trust transfer journal.
4. Trust ledger account Payne and Sanders proposed purchase from Ang – as credit.
5. Trust ledger account Payne and Sanders proposed purchase from Ang – as debit.
6. Trust ledger account Payne and Sanders incorporation of Chandos Real Estate – as credit.
7. Trust ledger account Payne and Sanders incorporation of Chandos Real Estate – as debit.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 27 of 78
See below to find out the particulars required on a trust transfer journal.
Also look at the two ledger accounts for Payne and Sanders on page 18 of your Workbook to see how the transfer
has been recorded there.
Trust transfer journal
The number of the trust
transfer journal folio on which
the transfer is recorded must
be entered in the relevant
trust ledger accounts:
s 42(7)(c) of the Regulation.
20XX
July 31
Each entry must include the
amount transferred:
s 43(4)(d) of the Regulation.
POSTED
TO
LEDGER
JOURNAL
PARTICULARS
REF NO
1
From Payne and Sanders
Proposed purchase from Ang
File A7

To Payne and Sanders incorporation of
Chandos Real Estate Pty Ltd
File A8
To be held on a/c of c/d in new matter

The date the trust money is
transferred is required by
s 43(4) of the Regulation.
DR
$
CR
$
SIGNATURE
1,000.00
Each entry in the journal must include the name of the
person and a brief description of the matter conducted
for the person:

from whose trust ledger account the moneys are
transferred: s 43(4)(b)

to whose trust ledger account the moneys are
transferred: s 43(4)(c) of the Regulation.
1,000.00 A Student
Each entry must include the
signature of the trustee,
authorised principal or
authorised legal practitioner
associate, authorising the
transfer: ss 43(2) and (6) of
the Regulation.
Each entry must also include a brief description of the
matter (purpose) for which the moneys are transferred:
s 43(4)(e) of the Regulation.
Secondary records – trust
Refer to the trust transaction list for July on page 16 of this booklet and compare each transaction there with the
comparable cash book and ledger entries in your Workbook. For example, in transactions (d) and (e), both
cheques were banked on the same deposit slip. Note how that is recorded in the 'banking total' and 'banking date'
columns in the cash book.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 28 of 78
3.7
Answers
Secondary records
Q3/1 The correct answer is 1: receipts cash book and 2: ledger.
The receipts cash book and ledger are the required secondary records.
Ledger
Q3/2 The correct answer is: in the trust account payments cash book and the trust ledger.
Trust transfer journal
Q3/3 The correct answer is: 3, 5 and 6 are correct.
Trust money properly payable from one trust ledger account to another may be transferred by journal entry: s 43
of the Regulation. Each trust ledger account must contain particulars of all trust money received or paid: s 42.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 29 of 78
Section 4: Understanding office accounts
4.1
Receipts and deposits in office account
In this section, you will need to use your Workbook.
Remember, although the Regulation does not cover office records, it is good practice to keep your office records in
the same way as trust records, as far as possible.
So, let’s look back to the start of your practice, Law & Co. On 18 July, you and your partner (Morgan Smith)
opened an office bank account at College Bank, each paying in, from your own money, a bank cheque for $20,000
(from Westpac, New Farm) as contribution to capital.
Q4/1 Complete office account receipts 70701 and 70702, and a bank deposit form (pages 20 and 22 of your
Workbook) ensuring you record all details.
Q4/2 Where else must the receipt of those funds be recorded?
4.2
Office account cash book
Look at both the office account cash book (page 24) and the trust account cash book (page 8) in your Workbook
now.
Note that the office account cash book has more columns than the trust account cash book. This is to allow GST
to be itemised separately and to distinguish between amounts for which the practice needs to account for GST and
those for which it does not.
Look at the entries in the office account cash book showing receipt of the capital contributions. As partnership
capital does not attract GST, your capital contribution has been recorded in the non-taxable column. Note also the
entry in the last column – the total of the deposit is shown there, not the amounts of the individual cheques.
4.3
Office account ledger
Turn now to the office account ledger on page 30 of your Workbook. You will see that accounts PL1 and PL2 show
that you and your partner each have credit balances of $20,000.
Remember that the office account ledger is sub-divided into private ledger accounts and client ledger accounts. If
you turn to page 36, you will see the client ledger accounts start there.
4.4
Payments from office account
Q4/3 On 21 July, you needed to pay Telstra by cheque $550 for installation of telephones. Would you use a trust
cheque or an office cheque?
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 30 of 78
The completed butt and cheque are shown here. As the payment to Telstra is payment for goods and services, it
includes an amount for GST. The net cost of installation would be $500 and GST a further 10%, which is $50. If
you are given a GST-inclusive price and need to calculate how much is GST, divide by 11!
In your records, it is useful to show these amounts separately. GST registered businesses are entitled to a credit
(an ‘input tax credit’) for GST paid. A detailed knowledge of GST is not required for this subject.
23001
21/07/20XX
Date 21/07/20XX
Pay Telstra
Payee Telstra
the sum of Five hundred and fifty dollars---
Detail Telephone ledger
account PL3 $500 + $50 GST
Law & Co
OFFICE
Not
Negotiable
$ 550.00
A Student
ACCOUNT
Chq $ 550.00
“•23001 ‘•082’”000•’987’654321”•
23001
Look now at the first entry of the office account payments cash book on page 27 of your Workbook. Note how the
$550 paid has been recorded:

$50 in the GST column.

$500 in the ‘taxable’ column.

$550 in the ‘total amount on face of cheque’ column.
Now turn to account PL3 (page 31 of your Workbook). Note that only the net cost, $500, has been shown there.
Payment of the GST is shown in a ledger account entitled GST – for these exercises, that has been done as a
lump sum at the end of the month.
Office account payments cash book
AMOUNT FOR LEDGER
GST
(PL13)
$
TAXABLE
$
50.00
500.00
NONTAXABLE
$
TOTAL AMOUNT
ON FACE OF
CHEQUE
$
550.00
Also on 21 July, as agent for Mr Chappell, you needed to pay College Pest Control Ltd $132 for a pest report on
the house being purchased from Thomson.
Mr Chappell had paid you $14,000 that day, which you had banked into the practice’s trust account.
Q4/4 Would you use a trust cheque or an office cheque to make the payment?
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4.5
Recording cheques
Did you show on the butt:

who you paid?

why you paid?

which account name and matter is to be debited?
Because the payment was made as agent for Mr Chappell, the practice does not have to show GST in its records –
the practice cannot claim an input tax credit and does not have to pay GST when reimbursed.
(In certain circumstances, Mr Chappell may be able to claim an input tax credit).
Look at the entry for cheque 23002 of the office account payments cash book on page 27 of your Workbook. Note
that $132 has been shown in the ‘non-taxable’ column and the ‘total amount on face of cheque’ column.
Now turn to Chappell’s office ledger account (page 36 of your Workbook). The whole amount, $132, is show as
owing by the client. A # has been added in front of the amount as a reminder that GST is not to be added to the
$132 when seeking reimbursement.
An amount in an office client ledger account which does not have a # will need to have GST added.
4.6
Office records
On 23 July, T Collins signed his will prepared by your practice and gave you his personal cheque (drawn on ANZ
St Lucia) for $99 for costs (including GST), in payment of the bill rendered to him that day.
Q4/5 Will you bank that money in your trust account or your office account?
4.7
Recording office account receipts
Did you remember to show on the receipt that $9 was for GST?
Look at the entry for receipt 70703 of the office account receipts cash book on page 24 of your Workbook to see
the break-up of $9 GST and $90 to be shown in the client ledger account.
Also look at the entries in Collins’ ledger account (page 36 of your Workbook). The initial entry would have been
made when the bill was rendered (there will be more information about that in the next section), to show the client
owed you $90 for your work. As the practice is accounting for GST on a cash basis, GST is payable upon
payment, not rendering, of the bill.
When you received payment of that bill, the amount of $90 was credited to the client ledger account, giving a nil
balance.
The receipt of $9 for GST is shown in a ledger account entitled GST – for these exercises, that has been done as a
lump sum at the end of the month.
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4.8
Office transaction list for July
If you would like more practice in office transactions, below is the office transaction list for July recorded in the
office account cash book (commencing at page 24) and office account ledger (commencing at page 30) of your
Workbook.
You may find it helpful to read through the transactions not already considered in this section and check how each
has been recorded. For example, for transaction (e), note that although the items are to be debited against
different ledger accounts, because the payee is the same, the payment can be made by one cheque: look at how
that is shown in the cash book.
If you wish to write the primary records for the balance of transactions listed, you can print further blank receipts,
deposit forms and cheques but don’t forget to add the correct numbers.
In this section, you will begin recording transactions in the secondary records in your Workbook.
(a)
On 18 July, you and your partner (Morgan Smith) opened an office bank account at College Bank, each
paying in, from your own money, a bank cheque for $20,000 (from Westpac New Farm) as contribution to
capital of the practice.
(b)
On 21 July, you paid Telstra, by cheque, $550 for installation of telephones.
(c)
Also on 21 July, as agent for Mr Chappell, you paid College Pest Control Ltd, by cheque, $132 for a pest
report on the house being purchased from Thomson.
(d)
On 23 July, T Collins signed his will prepared by your practice and gave you his personal cheque (drawn on
ANZ St Lucia) for $99 for costs (including GST), in payment of the bill rendered to him that day.
(e)
On 23 July, you bought from College Office Supplies Pty Limited (by one cheque) the following:

A computer: $3,300.

Desks, chairs and filing cabinets: $5,500.

Stationery: $550.
Different ledger accounts are used for office machines and office furniture because these assets carry
different rates of depreciation for income tax purposes.
(f)
On the same date, you bought from Australia Post stamps to the value of $29.70, which includes GST. The
practice is entitled to an input tax credit.
(g)
On the same date, you bought from Corner Store coffee and tea for $9.50. Coffee and tea are GST free.
(h)
On 25 July, each partner drew $450 by separate cheque. Drawings are usually posted to the debit of
partners' drawings accounts in the office ledger.
(i)
On 30 July, your partner appeared at Holland Park Court for Drake and later rendered a bill for costs, $400,
plus GST.
(j)
On 31 July, you paid by cheque to Chandos Real Estate, as managing agents for your office building, $1,980
for office rent.
(k)
On the same date, following your instructions from J Payne and V Sanders to incorporate a company under
the name of Chandos Real Estate Pty Limited, you applied, as agent, to the Australian Securities &
Investment Commission to reserve that name, paying the fee of $37 by office account cheque. (The fee is
covered by s 81-5 determination, so no GST is payable to ASIC. The fee is paid as agent, so no GST is
payable when the client pays you.)
(l)
On the same date, to facilitate your preparations in the Murray matter you arranged for Speedie Printers to
photocopy a number of documents and paid them $27.50. This payment is made as principal not agent.
The practice may claim an input tax credit for the GST paid ($2.50). The practice may recoup the GST
inclusive amount from the client (as provided in the costs agreement) and then pay the GST to the ATO (the
client may be able to claim an input tax credit).
Rather than entering the GST component of each transaction into the GST ledger account separately, the total
amounts of GST received and paid have been entered at the end of the month, as shown in account number PL13.
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4.9
Understanding office accounts and maintaining records
Now that you have mastered the completion of primary records and understand the workings of secondary records,
it is time for you to complete some cash book and ledger entries for yourself.
The transaction list for August is set out below.
Note: In this and later sections, you will be required to complete in your Workbook, entries for the
transactions in the list. These include transactions affecting both trust and office accounts. You will be
required to submit your completed Workbook in accordance with the timetable requirements.
Assuming that the primary records have been completed, in your Workbook, you are to complete the necessary
cash book and ledger entries for the first transaction.
Cash books are closed off at the end of each month so August entries should be made on page 2 of the cash
books (pages 25 and 29 of your Workbook).
Ledger accounts have running balances – they are not closed off at the end of each month.
4.10
Transaction list for August
T1
On 12 August, as instructed, you transferred $440 from your trust account to your office account, in payment
of costs as previously rendered in the matter of J Drake ats Police.
T2
Also on 12 August, you paid from your office account, as principal, $55 (including $5 GST) to College
Servers for service of the statement of claim in the matter of Murray v Brescia.
T3
On 15 August, as directed by D Fisher and as her agent, you paid $9,675 stamp duty to the Office of State
Revenue and $390 search fees to College Searchers.
T4
On 18 August, you received from J Brescia a bank cheque payable to your practice for $45,000 in full
payment of Murray’s claim. As instructed by M Murray, you accepted the cheque and banked it in your trust
account.
T5
On the same date, you rendered a bill for professional fees, $2,500, and disbursements (plus GST) to M
Murray and forwarded to him a trust statement of account – both documents showing a proposed transfer
from trust to office.
T6
On 22 August, each partner drew, by separate cheques, $450 for drawings.
T7
On the same date, you settled A Chappell’s purchase from Thomson. As directed by Chappell, you paid
from trust to office $132 as reimbursement for the cost of the pest report. You then prepared your bill of
costs for $750 (plus GST), delivering it to Chappell together with a trust statement of account.
T8
On the same date, you received from A Phillips of Counsel her opinion on behalf of D Fisher re Estate of T A
Fisher deceased, with her memo of fees for $330, which you paid by trust account cheque.
T9
On the same date, you paid $545 from trust account to the Australian Securities & Investments Commission
for fees on incorporation of Chandos Real Estate Pty Limited for Payne and Sanders. You then prepared
your bill of costs for $400 (plus GST), delivering it to Payne and Sanders together with details of the amount
paid by you as agent from your office account.
T10
On 26 August, with the authority of your clients, you transferred from your trust account to your office
account by (one) cheque, amounts due to you for costs and fees paid as agent:
(i)
a/c A Chappell re Thomson – $121.
(ii)
a/c Payne & Sanders re Chandos Real Estate Pty Limited – $455.
(To calculate GST, look at the office client ledger account to see whether there are any amounts with #,
indicating no GST payable, deduct any such amount from total received and divide remainder by 11.)
T11
On 27 August, you received from A Chappell a cheque for $704 for the balance of his account re Thomson.
Both this cheque and that to be received at T12 were banked on 28 August.
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T12
Also on 27 August, you prepared a bill of costs for $400 (plus GST) for appearing for J Rowe in the
Magistrates Court on a traffic matter on 22 August. J Rowe came to your office and you gave him the bill.
He gave you his personal cheque for $440 in payment.
T13
On 28 August, you received from Daphne Fisher a bank cheque for $288,000 to cover the balance purchase
price of the unit she was buying at Wishart. As there was going to be a delay in settlement, she gave you
written instructions to invest the amount for her in a Suncorp account, in order to earn interest pending
completion. The next day, you opened a Cash Management Flexi-Rate account, number 156-216, in the
name of your practice in trust for her at the Brisbane City branch of Suncorp, with interest initially 6% but
variable and payable on the last day of each month.
T14
Also on 29 August, M Murray gave you written directions to use the money held in trust for him as follows:
(i)
To pay your bill with regard to the personal injury claim against Brescia.
(ii)
To invest $40,000 at call in a Cash Management Trust at Macquarie Bank, Queen St, Brisbane in the
name of the practice in trust for him. You did so the same day and were allocated investor number
9618-1169. Earnings are declared periodically and paid on the last day of each month.
(iii)
To hold the balance in the trust account on account of costs and disbursements on his purchase from
Nguyen.
The cheque in payment of your bill was banked on 1 September.
T15
Also on 29 August, you received notice of dishonour of J Rowe’s cheque for $440 banked on 28 August.
Note: It will be necessary to make an appropriate entry in your cash book as well as in the client’s ledger.
Now we will work through transaction T1 from the above August transaction list.
On 12 August, as instructed, you transferred $440 from your trust account to your office account, in payment of
costs as previously rendered in the matter of J Drake ats Police (A2).
Before any payment is made, it is important to look at the trust ledger account for the matter to ensure you have
adequate cleared funds and that they are for this purpose. It shows:

a credit balance, that is, you are holding for this matter – $440

the amount was given to you on 23 July so funds would have cleared

it was given to you ‘on a/c of costs’.
Therefore, it is in order to proceed with making the payment from the trust funds.
Q4/6 Would the transfer be made by journal entry or cheque?
Your cash book for July shows the last trust cheque used was number 41006, so the trust cheque number for this
transaction would be 41007.
Q4/7 Who would be the payee?
Q4/8 Where will you first record the cheque?
1.
The trust payments cash book – page 2.
2.
The trust payments cash book – page 1.
3.
The trust receipts cash book – page 1.
Q4/9 See answer to Q4/8 and complete this step in your Workbook (page 13).
Q4/10 After the trust cash book, where is the transaction next recorded?
Q4/11 See answer to Q4/10 and complete this step in your Workbook (page 15).
What happens next? In practice, an office account receipt and bank deposit record would be completed.
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Q4/12 Assuming these have been done, where would the details be recorded?
1.
The office private ledger for costs rendered PL12.
2.
The office receipts cash book page 2.
3.
The office client ledger account for Drake.
Q4/13 See answer to Q4/12 and complete this step in your Workbook.
Q4/14 Now complete the secondary records for transaction T2.
Q4/15 Now complete the secondary records for transaction T3.
Q4/16 Now complete the secondary records for transaction T4.
This then completes Section 4. Additional transactions will be recorded in a later section.
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4.11
Answers
Receipts and deposits in office account
Q4/1 One completed receipt (70701) and the bank deposit form are shown below. The reference ‘PL1’ refers to
the first private ledger account.
L AW & CO
70701
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
18/07/20XX
Received from: A Student
by: Bank cheque
the sum of: Twenty thousand--dollars ---
cents
being: Capital contribution – A Student PL1
$ 20,000
: 00
per A Student
OFFICE ACCOUNT
18/07/20XX
THE SUM OF
NOTES
Forty thousand dollars---
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
CHEQUES
as herein
A Student
(signature)
40,000
00
$40,000
00
LAW & CO
OFFICE ACCOUNT
Account No
TOTAL
987 654 321
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
BANK
PLACE
A MO U N T
REC NO
1
Westpac
Westpac
New Farm
20,000.00
70701
2
Westpac
Westpac
New Farm
20,000.00
70702
3
4
5
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Q4/2 The correct answer is: the receipt of the funds should be recorded in the office receipts cash book and ledger.
These have been completed for you in your Workbook.
Payments from office account
Q4/3 The correct answer is: you would use an office cheque because it is a business expense.
Trust money can only be used as directed by the person on whose behalf it is held. Write the office cheque and
cheque butt (number 23001 on page 23 of your Workbook) completing the same amount of detail as is required for
trust cheques/butts.
Q4/4 The correct answer is: office cheque. You cannot use a trust cheque because the $14,000 which you banked
that day would not have had time to clear and your practice would not have control of the funds.
A law practice does not have control of the funds until such time as the funds have been cleared by the financial
institution, thus enabling the law practice to debit an amount to an account without a special clearance. You would,
in effect, be drawing against the trust money of another client. This may result in a breach of s 259. See the
definition of ‘trust money’ in s 237 of the Act and the definition of ‘when money is received’ in ss 242(1) and (2) of
the Act.
You must use an office account cheque. Write the office cheque and cheque butt (number 23002 on page 23 of
your Workbook).
Office records
Q4/5 The correct answer is: office account.
Because the cheque was given to you in response to you completing work and rendering your bill, it is not trust
money (to be held on behalf of the client). It is for the practice’s own use and may be banked direct to the office
account.
Complete the office account receipt (number 70703) on page 21 and a bank deposit form on page 22 of your
Workbook.
Understanding office accounts and maintaining records
Q4/6 The correct answer is: cheque.
The transfer cannot be made by journal entry. The trust transfer journal can only be used when transferring from
one trust ledger account to another trust ledger account, with the money staying in the same bank account.
To transfer money from the trust account to the office account, a trust cheque is required.
Q4/7 The correct answer is: Law & Co Office Account.
Q4/8 The correct answer is 1: the trust payments cash book – page 2.
You would record the cheque in the trust payments cash book on page 2.
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Q4/9 See below.
Trust account payments cash book
DATE OF
PAYMENT
20XX
CHEQUE
NO
August
410 -
12
07
CLIENT NAME, MATTER REFERENCE AND
MATTER DESCRIPTION
Drake ats Police
DUI charge
File A2
PAYEE
PURPOSE FOR
PAYMENT
Law & Co Office a/c
For costs
POSTED TO
LEDGER
Yes
AMOUNT FOR
LEDGER
$
440.00
TOTAL AMOUNT
ON FACE OF
CHEQUE
$
440.00
Q4/10 The transaction would be recorded in the trust ledger account for Drake.
Q4/11 See below.
Trust account ledger
ACCOUNT NAME:
ADDRESS:
MATTER REFERENCE:
MATTER DESCRIPTION:
Joshua Drake
151 Baker Street, Milton
A2
ats Police: DUI charge
DATE 20XX
RECEIVED
FROM OR
PAID TO
PURPOSE
July
23
From J Drake
On a/c of costs
118202
Aug
12
To Law & Co
Office a/c
For costs
41007
RECEIPT/
CHEQUE/
JNL NO
DR
$
CR
$
440
440
DR/
CR
00
00
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
CR
BALANCE
$
440
00
NIL
Page 39 of 78
Q4/12 The correct answers are 2 and 3.
It would be recorded in the office receipts cash book page 2 and the office client ledger account for Drake. Remember to show that $40 is GST. Only $400 is credited to
the office client ledger account.
Q4/13 See below.
Office account receipts cash book
DATE OF
RECEIPT
20XX
Aug
RECEIPT
NO
1
707 -
12
04
CLIENT NAME AND MATTER
DESCRIPTION
RECEIVED
FROM
POSTED
TO
LEDGER
PURPOSE OF
RECEIPT
CHQ/
CASH
GST
PL13
$
AMOUNT FOR LEDGER
ACCOUNT
Taxable
$
Nontaxable
$
TOTAL ON
RECEIPT
$
Balance brought forward
J Drake ats Police (A2)
BANKING
TOTAL &
DATE ON
DEPOSIT
SLIP
$
27,083.30
Law & Co
Trust a/c
For costs
Yes
Chq
40.00
400.00
440.00
440.00
12/8
Office account ledger (client)
ACCOUNT NAME:
ADDRESS:
MATTER REFERENCE:
MATTER DESCRIPTION:
DATE 20XX
July
30
Aug
12
Joshua Drake
151 Baker Street, Milton
A2
ats Police: DUI charge
RECEIVED
FROM OR PAID
TO
PURPOSE
Costs rendered
From Law & Co
Trust a/c
For costs
RECEIPT/
CHEQUE/
JNL/BILL
NO
2
70704
DR
$
400
CR
$
DR/
CR
00
DR
400
00
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
BALANCE
$
400
00
NIL
Page 40 of 78
Q4/14 The transaction must be recorded in the office payments cash book (page 2) and in the office ledger account
for Murray:
 Cheque number is 23011.
 Ledger account for Murray v Brescia.
 $5 is GST.
 $50 to be shown as debit in client ledger account.
 $55 is total amount on face of cheque.
 Cheque number in ledger account is 23011.
 Running balance is DR $75.
Q4/15 The transaction must be recorded in the trust payments cash book (page 2) and in the trust ledger account
for Fisher’s purchase:
 Entries need to be made on two separate lines.
 Cheque numbers are 41008 and 41009.
 Ledger account D Fisher purchase from Greig.
 Cheque number 41008 is for $9,675 and cheque number 41009 is for $390.
 Cheque numbers in ledger account are 41008 and 41009.
 Final running balance is CR $935.
Q4/16 The transaction must be recorded in the trust receipts cash book (page 2) and in Murray’s trust ledger
account:
 Receipt number is 118207.
 Account name and matter description: M Murray v J Brescia.
 Received from J Brescia.
 Cheque/cash: bank cheque.
 Amount is $45,000.
 Receipt number in ledger account is 118207.
 Final running balance is CR $45,227.
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Section 5: Charging legal fees, paying from trust, preparing
statements
Generally, as soon as practicable after being retained by a client, you must make a written disclosure to your client
specifying the basis on which legal costs will be calculated and an estimate of those costs: s 308.
Q5/1 Choose the correct statement(s) from those below:
1. A costs disclosure is always required when the legal costs and disbursements payable by the client exceed
$1,500.
2. A costs disclosure is not required when the client is a public company, the Commonwealth or a State.
3. A costs disclosure must always specify the total amount payable by the client or an estimate or range of
estimates of the total likely to be payable.
4. A costs disclosure must always include an explanation of the significant variables that will affect the total legal
costs payable for the work.
5.1
Preparing accounts
The exact form of an account will depend on a practice’s policy and style. A bill may be in the form of a lump sum
bill or an itemised bill: s 330(1).
Let’s look at some of the formalities in common use. Consider this example of a lump sum bill and review the
notes below.
Law & Co
Standard letterhead
Law & Co, Solicitors
181 Ann St, Brisbane 4000
ABN 91 234 567 890
5.2
Bill of costs
Different terminology may be used,
for example ‘Memorandum of fees’
or ‘Tax invoice’.
BILL OF COSTS
MS1
23 July 20XX
Opening formalities
Office reference, date, client’s name
and address, name of matter.
Mr T Collins
10 Bowen Street
St Lucia Qld 4067
$90
As the fees are not more than
$1,500, a costs disclosure is not
essential.
Your Will
To our costs of acting for you on preparation of will as per costs
agreement dated 21 July 20XX.
[email protected]%
AMOUNT DUE AND OWING
Law & Co
Per: M Smith
90.00
9.00
$99.00
E& OE
Clients registered for GST may
require you to provide them with a
bill in the form of a tax invoice as
required by the GST legislation, to
enable them to claim an input tax
credit for GST included in your bill.
The bill must be signed by a legal
practitioner or employee of the
practice.
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Page 42 of 78
5.3
Preparing bills of costs
A client has a right to request an itemised bill after receipt of a lump sum bill: s 332(1).
Consider this example of an itemised bill.
Law & Co Solicitors
181 Ann St, Brisbane 4000
ABN 91 234 567 890
“To our costs…”
The bill must include the basis on
which the costs have been
calculated and charged (whether on
a lump sum, an hourly rate, an item
of work, a part of proceeding or other
basis).
BILL OF COSTS
MS2
30 July 20XX
When time costing is used, it is
important to show the time spent on
each activity.
J Drake
10 Bowen Street
Milton Qld 4064
DUI Charge
To our costs of acting for you on defending DUI charge, being 2
hours agreed at $200 per hour as follows
23 July MS
30 July MS
5 Aug MS
Taking instructions to appear at
Holland Park Court
Phone call to you
Appearance at Court
“MS…”
It is good practice to identify the
name and status of those who did
the legal work. This should coincide
with the details in the client
agreement, as required by the
Notice, cl 8.
40mins
20mins
60mins
[email protected]%
400.00
40.00
$440.00
Less amount to be transferred from trust
on receipt of your authority
$440.00
AMOUNT DUE AND OWING
Law & Co
Per: M Smith
Nil
E& OE
Now look at transaction T5 of the transaction list for August on page 34 of this booklet. You have completed work
for the client M Murray (of 4 High Street, Spring Hill) in the matter of a personal injury claim against Brescia (A5).
Q5/2 Your professional fees are $2,500. What other amounts should be included in the bill of costs?
Q5/3 In a blank Word document, prepare the bill of costs for the Murray v Brescia matter. Save and print your
completed bill to keep with your Workbook. The amount charged for professional fees is a lump sum based on a
costs agreement dated 25 July.
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Page 43 of 78
5.4
Recording costs
For the disbursements (photocopying and service fees), the primary records were the office cheques (and butts)
and the secondary records the office cash book and ledger.
For the professional costs, the bill is the primary record.
Q5/4 What are the secondary records where the costs must be entered?
1. Office payments cash book.
2. Office receipts cash book.
3. Office client ledger account.
4. Office private ledger account.
5. Trust ledger account.
Q5/5 What amount should be entered in the office private ledger account and office client ledger account?
Office private ledger account:
 $2,500
 $2,575
 $2,750
Office client ledger account:
 $2,500
 $2,575
 $2,750
Enter this amount in the office private ledger account (page 34) and office client ledger account (page 37) in your
Workbook now.
The amount owing by M Murray on receipt of the bill was $2,832.50, being $2,575 shown in the office client ledger
account plus $257.50 GST.
Look now at the trust ledger account for M Murray v Brescia on page 17 of your Workbook and the trust account
running balance.
Q5/6 How much trust money do you hold for him (refer to your work in Q4/16)?
1. $45,227
2. $46,875
3. $44,773
5.5
Transfer of funds from trust to office
You have more than enough money in trust to pay the Murray bill.
The Act does not prevent you from withdrawing, from trust, reimbursement for disbursements paid or money due
for costs, in certain circumstances.
Q5/7 What are those circumstances?
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5.6
Trust account statement
Although a bill of costs may include a proposed transfer from trust, it does not show what money has been paid into
trust or how that money has been used.
The receipt and payment of trust money for each matter must be reported in a separate trust account statement.
Q5/8 When must a trust account statement be sent?
1. On completion of a matter.
2. Once every six months.
3. Once a year at 30 June.
4. As soon as practicable after the client requests one.
5. Every time money is paid from trust.
What does a trust account statement look like and what information does it contain?
A good rule of thumb is that, largely:
 a bill is a reflection of the office client ledger account
 a trust account statement is a reflection of the trust ledger account.
Have a look at the example below:
LAW & CO SOLICITORS
181 Ann St, Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT STATEMENT
These are formalities. It is usual to
show the date of the statement, the
name and address of the client and a
reference to the matter.
12 August 20XX
J Drake
151 Baker Street
Milton Qld 4064
PCA Charge
20XX
July 23
Aug 12
DR
$
From you on account
of costs
Transfer to our office
account for costs and
GST
Balance Held: NIL
Law & Co
Per: (Your signature)
440.00
CR
$
440.00
Particulars of receipt and payment of
trust money appear as recorded in
the trust ledger account for the
matter.
Note the balance should be noted,
even if it is ‘nil’.
Although there is no requirement that
a statement be signed, in most
practices, it is usual to do so.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
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Q5/9 In a blank Word document, prepare a trust statement of account for the Murray v Brescia matter (dated 18
August), showing a proposed transfer to the office account. Remember to save your work and print your
completed statement to keep with your Workbook.
LAW & CO SOLICITORS
181 Ann St, Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT STATEMENT
20XX
July 25
July 28
July 29
Aug 18
Aug 18
From you on account of
costs and disbursements
To A Phillips for counsel
fees
To District Court for filing
fee
From J Brescia in payment
of claim
Proposed transfer to our
office account for costs and
disbursements
Balance to be held in trust
pending your instructions
Law & Co
Per: (Your signature)
Q5/10 Now continue recording transactions T6 to T12 of the transaction list for August on pages 34 and 35 of this
booklet.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 46 of 78
5.7
Answers
Q5/1 2 and 3 are correct.
 A costs disclosure is not required when the client is a public company, the Commonwealth or a State.
 A costs disclosure must always specify the total amount payable by the client or an estimate or range of
estimates of the total likely to be payable.
1. Incorrect. A costs disclosure is not required where the maximum charge for legal costs alone is $1,500: s
311(1). ‘Legal costs’ does not include disbursements (outlays): s 346.
2. Correct. Disclosure is not required if the client is a public company or a Commonwealth or State Minister,
government department or public authority: s 311(1)(c).
3. Correct. A costs disclosure must specify the basis on which the legal costs will be calculated, together with an
estimate of the total: s 308(1). If it is not reasonably practicable to provide an estimate, a range of estimates
and the major variables affecting calculation of the costs must be provided: s 308(1)(c).
4. Incorrect. An explanation is only required when an estimate of the total legal costs is not reasonably
practicable: s 308(1)(c).
Preparing bills of costs
Q5/2 The following amounts, shown in the office client ledger account for the matter (page 37 of your Workbook),
should be included as disbursements:
 Photocopying – $25
 Service fees – $50
GST of 10% on the total should also be shown, that is $257.50.
Any amounts paid out of trust moneys are not included on a bill, as they are shown in a statement of account.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
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Q5/3 See below.
LAW & CO SOLICITORS
181 Ann St, Brisbane 4000
ABN 91 234 567 890
Bill of Costs
(Office reference, including number of bill should be shown)
18 August 20XX
Even though the form of account has
been agreed to, sufficient details of
the work done must be included for
the client to decide whether the
charge is reasonable.
M Murray
4 High Street
Spring Hill Qld 4000
Personal injuries claim against J Brescia (A5 )
To our costs of acting for you on personal
injury claim including taking instructions,
briefing counsel, preparing, filing and having
served statement of claim, lengthy telephone
negotiations with Brescia leading to payment
of claim as per costs agreement dated 25 July
20XX
Photocopying
Service fees
2,500. 0 0
25 .0 0
50 .0 0
GST
257.50
Total
$2,832.50
To be transferred from trust account
Law & Co
Per: (Your signature)
The date of the bill must be included.
A costs agreement must specify a
lump sum amount or the basis on
which fees and costs will be
calculated: s 308 of the Act.
Only amounts paid from office are
shown here; amounts paid from trust
will be shown on a trust account
statement. All anticipated outlays
should have been shown in the costs
agreement.
A costs agreement should provide
for the client to pay GST. GST is
payable on all costs charged and
outlays paid as principal, as part of
the ‘service’ provided.
The actual transfer of money from
trust to office cannot take place until
directed in writing by Murray or until
seven days have elapsed since
delivery of the bill, with no objection
from Murray: s 58(4)(b)(i) of the
Regulation.
Recording costs
Q5/4 3 and 4 are correct.
 Office client ledger account.
 Office private ledger account.
1 and 2 – Incorrect. No money is being received or paid, so no entries are made in the office account cash book.
3 – Correct. The office client ledger account shows how much the client owes for this matter.
4 – Correct. The costs are recorded in an office private ledger account entitled ‘costs rendered’.
5 – Incorrect. No trust money is involved so no entries are made in trust records.
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Q5/5 $2,500 should be recorded in both the office private ledger account and the office client ledger account.
Only the amount of the professional costs is entered in the office private ledger account and the office client ledger
account. The disbursements have already been recorded (in the office cash book and the client ledger account).
In most manual accounting systems, where the practice is accounting for GST on a cash basis, GST is not shown
in any records other than the bill at this stage. When payment of the bill is received, the amount attributable to
GST will be separately itemised.
The correct entries are below.
Office account ledger (Private)
ACCOUNT NAME:
ACCOUNT NUMBER:
DATE 20XX
July
Aug
Costs rendered
PL12
RECEIVED
FROM OR PAID
TO
PURPOSE
RECEIPT/
CHEQUE/
JNL/BILL
NO
DR
$
CR
$
DR/
CR
BALANCE
$
23
T Collins Will
1
90
00
CR
90
00
30
J Drake ats
Police (A2)
2
400
00
CR
490
00
18
Murray v
Brescia (A5)
3
2,500
00
CR
2,990
00
DR/
CR
BALANCE
$
Office account ledger (Client)
NAME:
M Murray
ADDRESS:
4 High Street, Spring Hill
MATTER DESCRIPTION: v J Brescia: Personal injury claim (A5)
DATE 20XX
RECEIVED
FROM OR PAID
TO
PURPOSE
RECEIPT/
CHEQUE/
JNL/BILL
NO
DR
$
CR
$
July
31
Speedie
Printers
Photocopying
23010
25
00
DR
25
00
Aug
12
College Servers
Service fees
23011
50
00
DR
75
00
Aug
18
2,500
00
DR
2,575
00
Costs rendered
3
Q5/6 1 is correct: $45,227.
You hold $45,227 for Murray.
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Transfer of funds from trust to office
Q5/7 As set out in s 58(3) of the Regulation, the law practice may withdraw trust money:
 in accordance with a complying costs agreement that authorises the withdrawal
 in accordance with instructions authorising the withdrawal; or
 where the money is owed to the practice for reimbursement of money already paid by the practice
…provided the practice gives the client a request for payment, referring to the proposed withdrawal, or a written
notice of withdrawal.
As set out in s 58(4) of the Regulation, the law practice may also withdraw trust money, if the practice has given the
client a bill and:
 the client has not objected within seven days
 the client has objected within seven days but has not applied for a review within 60 days; or
 the money is otherwise legally payable.
Trust account statement
Q5/8 1, 3 and 4 are correct.
Section 53(6) of the Regulation requires the statement to be provided as soon as practicable after each of these
events. There are certain exemptions, however, for providing a statement at 30 June under s 53(7).
Q5/9 See below.
LAW & CO SOLICITORS
181 Ann St, Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT STATEMENT
18 August 20XX
DR
$
July 25
July 28
July 29
Aug 18
Aug 18
From you on account of costs and
disbursement
To A Phillips for counsel fees
To District Court for filing fee
From J Brescia in payment of claim
Proposed transfer to our office account for
costs and disbursements
CR
$
1,000. 0 0
385.00
388.00
45,000 .0 0
2,832.50
Balance to be held in trust pending your
instructions
$42,394.50
Law & Co
Per: (Your signature)
Notes:
 As soon as practicable after completion of a matter, a statement should be delivered to the person on whose
behalf the money was held: s 53(6) of the Regulation. A separate ledger account for each matter is required.
 A correct and detailed account of all trust money and the application thereof should be rendered.
 Particulars of the remaining balance (if any) should be included.
Q5/10 See below.
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T6:
 Office payments cash book page 2 (cheques – 12 and 13)
 PL9 and PL10 (balance in each, DR $900)
T7:
 $132 in:
o trust payments cash book (cheque – 10)
o debit Chappell’s trust ledger account (balance CR $121)
o office receipts cash book (receipt – 5, non-taxable)
o credit Chappell’s office ledger account (balance NIL)
 $750 in:
o costs rendered ledger account (bill 4)
o debit Chappell’s office ledger account (balance DR $750)
T8:
 Trust payments cash book (cheque – 11)
 Debit Fisher’s trust ledger account re estate (balance CR $620)
T9:
 $545 in:
o trust payments cash book (cheque 41012)
o Payne and Sanders trust ledger account (balance CR $455)
 $400 in:
o costs rendered ledger account (bill 5)
o debit Payne & Sanders office ledger account (balance DR $437)
T10:
 Trust payments cash book (cheque – 13, record on two lines, show total of cheque once in last column, $576)
 Debit Chappell’s trust ledger account $121 and Payne and Sanders $455 (balance in each account NIL)
 Office receipts cash book (receipt – 6, Chappell purchase from Thomson, GST $11, taxable $110, total on
receipt $121; receipt – 7, Payne and Sanders re Chandos, GST $38, taxable $380, non-taxable $37, total on
receipt $455, banking total $576)
 Credit Chappell’s office ledger account $110, balance DR $640
 Credit Payne and Sanders office ledger account $380 plus $37, balance DR $20
T11:
 Office receipts cash book (receipt – 8, Chappell purchase from Thomson, GST $64, taxable $640, total on
receipt $704 – do not complete banking total column)
 Credit Chappell’s office ledger account $640 (balance NIL)
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T12:
 $400 in:
o costs rendered ledger account (bill 6)
o open new office ledger account J Rowe – traffic matter (balance DR $400)
 $400 in:
o office receipts cash book (receipt – 9, GST $40, taxable $400, total on receipt $440, banking total and date
$1,144, 28/8/XX)
o credit Rowe’s office ledger account $400 (balance NIL)
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Section 6: Maintaining records of other trust money
6.1
Categories of trust money
Q6/1 There are six categories of trust money a practitioner handles in practice. What are they?
Q6/2 If a client gives you a cheque made out to the Office of State Revenue asking you to pay the stamp duty in
their matter that day, what category of funds have you received?
1. Transit money.
2. General trust account money.
3. Investment money.
4. Controlled money.
Q6/3 If a client gives you a cheque to cover the balance purchase price, what category of funds have you
received?
1. Transit money.
2. General trust money.
3. Investment money.
4. Controlled money.
5. There is insufficient information to determine the category of funds.
6.2
Transit money
Q6/4 What accounting records are you required to complete with regard to transit money?
6.3
Investment money
Q6/5 A client gives you a cheque to cover the balance purchase price of a property and gives you written
instructions to invest it to earn interest until needed. What records must you complete to comply with the Act and
Regulation?
1. Trust account receipt.
2. Trust account bank deposit form.
3. Trust account cheque.
4. Trust account receipts cash book.
5. Trust accounts payments cash book.
6. Trust transfer journal.
7. Trust ledger account as credit.
8. Trust ledger account as debit.
9. Investment journal.
10. Investment control account as credit.
11. Investment control account as debit.
12. Individual investment ledger account as credit.
13. Individual investment ledger account as debit.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 53 of 78
Let’s look now at transaction T13 of the transaction list for August on page 35 of this booklet. On 28 August, you
received from Daphne Fisher a bank cheque for $288,000 to cover the balance purchase price on the unit she was
buying in Wishart (A4). As there was going to be a delay in settlement, she gave you written instructions to invest
the amount for her in a Suncorp account, in order to earn interest pending completion. As investment money, it
had to be deposited first in the general trust account.
Q6/6 Complete the trust cash receipts book and ledger entries for T13 now.
On 29 August, after being advised that Fisher’s bank cheque had cleared, you drew a trust cheque to Suncorp and
opened a Cash Management Flexi-rate account, number 156-216, in the name of your practice in trust for D Fisher
at the Brisbane City branch, with interest initially 6% but variable and payable on the last day of each month.
Complete the trust cash payments book and ledger entries now.
It is also recommended that the investment be recorded in an investment control account and investment ledger.
Q6/7 Complete the DR, CR or DR/CR in the investment ledger below.
Investment control account
DATE 20XX
PARTICULARS
Aug
D Fisher
29
RECEIPT/
CHEQUE/
JNL NO
DR
$
CR
$
DR/
CR
41014
BALANCE
$
288,000
00
Investment account in trust for D Fisher
Law & Co in trust for D Fisher
Cash Management Flexi-rate account number 156-216
Suncorp, Brisbane city
DATE 20XX
PARTICULARS
Aug
Suncorp (investment)
29
RECEIPT/
CHEQUE/
JNL NO
DR
$
CR
$
DR/
CR
41014
BALANCE
$
288,000
00
Q6/8 When that account is closed, what records would need to be completed?
Q6/9 Now complete, in your Workbook, all secondary records for transactions T14(i), (ii) and (iii) and T15 of the
transaction list for August on page 35 of this booklet.
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Page 54 of 78
6.4
Answers
Categories of trust money
Q6/1 The six categories are:
 general trust money
 transit money
 controlled money
 power money
 written direction money
 investment money.
Q6/2 The correct answer is: transit money because it is in the form of a cheque drawn with instructions to pay or
deliver to a third party: s 237 definition of ‘transit money’.
Q6/3 The correct answer is 5: the question does not give enough information for us to know. It may be 1, 2, 3 or 4.
1. If the cheque is made out to the vendor and our client has directed us to pay it on settlement, then it is transit
money.
2. If the cheque is payable to our practice and the client has not directed us to do otherwise, it is general trust
money.
3. If the client has directed us to invest the money pending settlement, it is investment money. We must pay it
into the practice’s general trust account, wait for it to clear and then draw a cheque to the relevant financial
institution and deposit it.
4. If the client has given a written direction to deposit in an account other than a general trust account, it will be
controlled money.
Transit money
Q6/4 The correct answer is: the practice must record and keep brief particulars sufficient to identify the transit
money transaction and the purpose for which the money was received (s 52(2) of the Regulation).
A transit money register may be used or, alternatively, a file not kept on the particular matter file would be
sufficient. A copy of the transit cheque should also be retained, together with other relevant documentation, such
as directions from the client.
Investment money
Q6/5 The correct answer is: 1, 2, 3, 4, 5, 7, 8, and 12 are correct. 9 and 10 may be used but are not required by
the Act or the Regulation.
 1, 2, 4 and 7 are correct. Before a practitioner invests trust money, it must be deposited into the practice’s
general trust bank account. This requires a trust receipt, bank deposit form and cash book – receipts and
ledger account (CR).
 3, 5 and 8 are correct. To pay money from practice’s general trust bank account in order to invest it, a trust
cheque and cash book – payments and ledger (DR) must be completed.
 6 is incorrect. A trust transfer journal should not be used. It is only relevant when trust money is transferred
from one trust ledger account to another trust ledger account.
 9, 10, and 11 are incorrect. Although an investment journal and investment control account may be used, they
are not required. If an investment control account is used, the entry would appear as a credit.
 12 is correct. A register of the investment of trust moneys must be kept: s 55 of the Regulation. It is also
recommended that the register contain an investment ledger account for each client on whose behalf an
investment is made. The amount invested will appear as a credit to the investment ledger account.
 13 is incorrect. For each amount invested, you must credit the individual investment ledger account.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
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Q6/6 See below.
Trust account receipts cash book
CLIENT NAME,
MATTER
PURPOSE
RECEIPT
RECEIVED
REFERENCE AND
FOR
NO
FROM
MATTER
RECEIPT
DESCRIPTION
DATE OF
RECEIPT
20XX
Aug
11820-
28
8
Fisher purchase
from Greig (file
A4)
D Fisher
POSTED
TO
LEDGER
Bal. pur
price to
be
invested
Yes
CHQ/
CASH
AMOUNT
ON
RECEIPT
AND FOR
LEDGER
$
BANKING
TOTAL
ON
DEPOSIT
SLIP
$
BANKING
DATE ON
DEPOSIT
SLIP
288,000
288,000
28/8
Bank
chq
Trust account ledger
NAME:
ADDRESS:
MATTER REFERENCE:
MATTER DESCRIPTION:
DATE 20XX
Daphne Fisher
6 Park Road, Brighton
A4
Purchase from Greig of home unit at Wishart
RECEIVED
FROM OR
PAID TO
PURPOSE
RECEIPT/
CHEQUE/
JNL NO
DR
$
CR
$
Aug
28
Fr D Fisher
Bal. pur
price to be
invested
118208
288,000
00
DR/
CR
BALANCE
$
CR
935
00
CR
288,935
00
Q6/7 See below.
Investment control account
DATE 20XX
PARTICULARS
Aug
D Fisher
29
RECEIPT/
CHEQUE/
JNL NO
DR
$
41014
CR
$
288,000
DR/
CR
00
CR
BALANCE
$
288,000
00
Investment account in trust for D Fisher
Law & Co in trust for D Fisher
Cash Management Flexi-rate account number 156-216
Suncorp, Brisbane city
DATE 20XX
PARTICULARS
Aug
Suncorp (investment)
29
RECEIPT/
CHEQUE/
JNL NO
DR
$
41014
CR
$
288,000
DR/
CR
00
CR
BALANCE
$
288,000
00
For each amount invested, you must credit the investment ledger account.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 56 of 78
Q6/8 The correct answer is: accrued interest would need to be credited to the investment control account and the
investment ledger account.
The amount withdrawn would need to be debited against the investment control account and the investment ledger
account.
The amount withdrawn would need to be banked into the practice’s general trust bank account with completion of a
trust account receipt and deposit form, together with entries in the trust receipts cash book and trust ledger account
for Fisher’s purchase as a credit.
Q6/9 See below.
Transaction 14(i)
Record $2,832.50 in:
 trust cash payments book (cheque – 15)
 trust ledger account for Murray v Brescia (balance CR $42,394.50)
 office cash receipts book (receipt – 10, GST $257.50, taxable $2,575)
 office ledger account for Murray v Brescia (balance NIL).
Transaction 14(ii)
Record $40,000 in:
 trust cash payments book (cheque – 16)
 trust ledger for Murray v Brescia (balance CR $2,394.50).
Credit an investment ledger account for Murray.
Transaction 14(iii)
Record $2,394.50 in:
 trust journal (as DR for Murray v Brescia, CR for Murray purchase from Nguyen)
 journal folio number 2
 to held on account c/d for purchase
 DR trust ledger account for Murray v Brescia (balance NIL)
 CR trust ledger account for Murray purchase from Nguyen.
Transaction 15
Record in the office cash book on the payments page or as a negative entry (in brackets)
on the receipts page. Instead of a cheque or receipt number, put ‘bank advice’:
 GST $40
 taxable $400
 total $440.
Also record in the office ledger account for Rowe (balance DR $400).
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Section 7: Preparing monthly reports
7.1
Balancing the cash book
The Regulation requires the trust cash book to be balanced within 15 working days of the end of each named
month: s 44(3). In practice, the balancing may not be done on the last day of the month but it must show the
position as at the last day.
Look at the trust cash book for July in your Workbook (pages 8, 11 and 12 of your Workbook).
Q7/1 How much trust money did your practice receive in July?
1. $23,890
2. $14,520
3. $28,390
Q7/2 How much trust money did your practice pay in July?
1. $13,870
2. $14,520
3. $28,390
How do you calculate how much trust money your practice holds at the end of July?
 You deduct the total payments from the total receipts. For July, that means $28,390 – $14,520 = $13,870.
 That amount is carried forward to the commencement of the next month – turn to pages 9, 11 and 12 of your
Workbook to see how the balancing was recorded and the balance carried over.
 Now, you need to balance your trust cash book as at the end of August. The first step is to total the receipts for
August on page 9 of your Workbook.
 If you have not completed the secondary records for the August transactions, you will need to do so before you
can balance your cash book. August transactions can be found on pages 34 and 35 of this booklet.
 In July, the total in the ‘amount on receipt’ column was the same as the total in the ‘banking total’ column.
However in August, the ‘banking total’ column has an extra figure: that is, the balance brought forward from
July, $13,870.
 So, for August, the total in the ‘amount on receipt’ column is $333,000 and the total in the ‘banking total’ column
is $346,870 ($333,000 + $13,870). That is the amount of trust money the practice would have held at the end of
August if no payments had been made in August.
 The next step in balancing the cash book for August is to total the payments for August on page 13 of your
Workbook. You should have recorded cheques 41007 to 41016. If not, go through the list of August
transactions to see what you have omitted.
 The totals in both the ‘amount for ledger’ and ‘total amount on face of cheque’ columns should be the same:
$342,920.50.
Q7/3 How do you calculate how much trust money your practice holds at the end of August? Show the calculation
on page 13 of your Workbook.
 First, record the balance as at 1 August. You will get that figure from the ‘banking total’ column at the top of
page 9 of your Workbook.
 Next you must record the receipts for August, that is, the total on page 9 of the figures in the ‘amount on receipt’
column.
 Add the balance figure to the receipts figure. That amount should be the same as the total in the ‘banking total’
column on page 9 of your Workbook.
 Now record the payments for August, that is, the total on page 13 of your Workbook of all payments.
 Next, subtract the payments for August, that is, the total on page 13 of your Workbook of all payments.
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 Next, subtract the payments figure from the balance plus receipts figure to get the trust account cash book
balance 31/8/XX’.
 Also carry forward the balance to the commencement of the next month (page 10 of your Workbook).
7.2
Reconciliation with ledger
Having balanced the cash book, you must reconcile that figure with the trust account ledger. Below is a suitable
format for a reconciliation with ledger (trust trial balance) for your trust account ledger.
LAW & CO TRUST ACCOUNT
Listing of individual trust ledger balances as at 31 July 20XX
MATTER
REF
DR
$
CR
$
ACCOUNT NAME
MATTER DESCRIPTION
A1
A Chappell
Purchase from Thomson
A2
J Drake
Ats Police
A3
D Fisher
Estate T A Fisher
A4
D Fisher
Purchase from Grieg
A5
M Murray
V J Brescia
Q7/5
A8
J Payne and V Saunders
Incorporation of Chandos Real Estate
Q7/6
253.00
Q7/4
950.00
11,000.00
Trust ledger balance as at 31/07/XX
13,870.00
Reconciled cash book as at 31/07/XX
13,870.00
Prepared by A Student on X August 20XX
A Student
Turn to page 15 of your Workbook. Look at trust ledger account for Chappell purchase from Thomson. What was
the balance in that account as at 31 July? CR $253 – as shown in the CR column of the ledger account for the
Chappell purchase. So, in the reconciliation with ledger (trust trial balance), for ledger account to Chappell
purchase from Thompson, $253 has been shown in the CR column.
Now look at the other trust ledger accounts, noting the balance in each as at 31 July.
Q7/4 Type the balance for Drake ats Police.
Q7/5 Type the balance for Murray v Brescia.
Q7/6 Type the balance for Payne and Sanders Incorporation of Chandos Real Estate.
Q7/7 In a blank Word document, prepare the reconciliation with ledger for the trust account for the end of August.
Assume you prepared it on 4 September 20XX. Please save and print your completed reconciliation to keep with
your Workbook.
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7.3
ADI reconciliation – trust
The next procedure for the trust account at the end of the month is the authorised deposit-taking institution (ADI)
reconciliation: s 44(2)(a) of the Regulation.
A financial institution reconciliation is a comparison between:
 the statement issued by your ADI showing transactions in your account
 the transactions recorded in your cash book.
The trust account ADI statement for July is set out below.
Trust ADI statement as at 31 July 20XX
Statement of account with College Bank
Law & Co
Trust account
Account No
123-456-789
PARTICULARS
July
DEBIT
$
CREDIT
$
BALANCE*
$
21
Chq
14,000.00
14,000.00 CR
23
Chq
400.00
14,440.00 CR
24
Chq
11,950.00
26,390.00 CR
25
Chq
1,000.00
27,390.00 CR
26
001
13,000.00
14,390.00 CR
002
340.00
14,050.00 CR
29
1,000.00
31
15,050.00 CR
004
388.00
14,662.00 CR
005
297.00
14,365.00 CR
Date of issue: 1 August 20XX
Page 1
Open your trust cash book for July (pages 8, 11 and 12 of your Workbook). What are the steps required in
preparing the trust account ADI reconciliation for July?
See the steps below and the following reconciliation statement.
Step 1
The reconciliation must show the position at the end of the month even though it will not usually
be prepared until a few days into the next month.
Step 2
Write down the balance shown in the ADI statement at the end of the month (for the trust
account, this should always be a credit figure).
Step 3
Compare the ADI reconciliation (if available) for the previous month with the ADI statement to
see whether outstanding deposits or unrepresented cheques from a previous month have now
been received by the ADI. If they have, no further action is required; if not, they must be
followed up and listed again this month.
This step is not applicable for July as it is the first month your practice has operated.
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
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Step 4
Compare items in the credit column of the ADI statement with those in the banking columns of
that month’s receipts page of the cash book – list as outstanding deposits any amounts which
are in the cash book but not in the ADI statement (identify by date of deposit) and add to step 2
balance.
Note that the only valid cause for an outstanding deposit is if money is received on the last
banking day of the month but is not banked until the next banking day.
Note that the ADI statement shows all money recorded in the cash receipts book. There are no
outstanding deposits.
Step 5
Compare items in the debit column of the ADI statement with payments listed on the payments
page of the cash book – list as unpresented any cheques that are in the cash book but not in the
ADI statement (identify by cheque number) and subtract from step 4 figure.
You will see that cheques 003 and 006 have not yet been presented to your bank.
Step 6
Compare the step 5 figure with the balance in the cash book. They should be the same. Look at
the balance brought forward figure on page 9 in your Workbook and you will see the balance
figure is $13,870.
Step 7
The reconciliation statement must show the date the statement was prepared: s 44(2)(a)(ii) of
the Regulation.
LAW & CO TRUST ACCOUNT
ADI reconciliation as at 31 July 20XX
$
Balance as per ADI statement
Add outstanding deposit
14,365.00
CR
Nil
14,365.00
Less unpresented cheques
003
$385.00
006
$110.00
495.00
13,870.00
Balance as per cash book
13,870.00
DR
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Q7/8 Now, as a Word document, prepare the trust account ADI reconciliation for August. The trust account ADI
statement for August is set out below. Please save and print your completed ADI reconciliation to keep with your
Workbook.
Trust ADI statement as at 31 August 20XX
Statement of account with College Bank
Law & Co
Trust account
Account No
123-456-789
PARTICULARS
August
1
DEBIT
$
CREDIT
$
Balance brought forward
14,365.00 CR
006
110.00
14,255.00 CR
3
003
385.00
13,870.00 CR
12
007
440.00
13,430.00 CR
18
Chq
45,000.00
58,430.00 CR
008
9,675.00
48,755.00 CR
19
009
390.00
48,365.00 CR
22
010
132.00
48,233.00 CR
23
012
545.00
47,688.00 CR
26
013
576.00
47,112.00 CR
28
Chq
29
014
288,000.00
47,112.00 CR
016
40,000.00
7,112.00 CR
288,000.00
Date of issue: 1 September 20XX
7.4
BALANCE*
$
335,112.00 CR
Page 2
Investment money
That completes the end of month procedures for the trust account.
Now what about investment money? Answer the following questions.
Q7/9 Are you required to balance a cash book for investment money?
Q7/10 Are you required to prepare an ADI reconciliation for investment money?
Q7/11 Are you required to prepare a reconciliation with ledger for investment money?
Although there is no section which refers specifically to the need to complete a reconciliation with ledger for
investment money, the duty with respect to the keeping of accounts and other records of trust money under the Act
extends to investment money.
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Interest and earnings on the investments were payable at the end of the month. However, as you would not
receive notice of the amount payable until a few days later, the reconciliation will not include these amounts.
Interest must be entered in the accounts when notice of the accrual is received. Ensure that it is then recorded in
both the investment control account and the investment ledger accounts for each person. It is helpful to include in
the entry the date the interest was actually credited to the account.
Q7/12 In a blank Word document, prepare the reconciliation for investment money for the end of August, in the
following format.
LAW & CO
Investment money
Reconciliation as at _______________
DR
$
CR
$
Investment control account
Investment account in trust for D Fisher
Investment account in trust for M Murray
7.5
Office account
What about the office account?
Although not required by the Regulation, it is good practice to carry out similar procedures for your office account
records as for the trust account.
1. End of month entries.
2. Reconciliation with ledger.
3. ADI reconciliation.
There are a few differences.
1. End of month entries for office account – in addition to balancing the cash book and carrying the balance
forward.
As GST was not entered in the ledger during the month, you must now, in the office account cash book:
 total the GST received and record it as a credit in the GST ledger account (PL13)
 total the GST paid and record it as a debit in the GST ledger account.
Q7/13 Look at how these have been done in your July records and then complete the entries for August.
 Office cash receipts book.
 Office cash payments book.
 Office cash receipts book.
 Office private ledger book – GST PL13.
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7.6
Office reconciliation with ledger
You use the same procedure as for a trust account.
Open your Workbook at the office ledger accounts (pages 30 to 38) and see how the balances as at 31 July have
been recorded in the reconciliation with ledger below.
LAW & CO OFFICE ACCOUNT
Reconciliation with ledger as at 31 July 20XX
LEDGER ACCOUNT NAME
ACCOUNT NO/MATTER
DR
$
CR
$
(Your name) – capital
PL1
20,000.00
M Smith – capital
PL2
20,000.00
Telephone
PL3
500.00
Office machines
PL4
3,000.00
Office furniture
PL5
5,000.00
Stationery
PL6
500.00
Postage
PL7
27.00
Office refreshments
PL8
9.50
(Your name) – drawings
PL9
450.00
M Smith – drawings
PL10
450.00
Office rent
PL11
1,800.00
Costs rendered
PL12
GST
PL13
A Chappell
490.00
1,076.20
Pur fr Thomson (A1)
132.00
J Drake
Ats Police (A2)
400.00
M Murray
V Brescia (A5)
25.00
Incorp Chandos (A8)
37.00
Payne and Sanders
13,406.70
Office account cash book balance
31/07/XX
40,490.00
27,083.30
40,490.00
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Q7/14 Now prepare the reconciliation with ledger for your office account for August.
The same procedure is used for the office financial institution reconciliation as for the trust ADI reconciliation: a
comparison of the financial institution statement with the cash book. The office financial institution statements for
July and August are set out below.
Statement of account with College Bank
Law & Co
Office account
Account No
987-654-321
DEBIT
$
PARTICULARS
July
CREDIT
$
BALANCE*
$
40,000.00
40,000.00 CR
18
Chqs
22
001
23
Chq
24
003
9,350.00
30,199.00 CR
005
9.50
30,189.50 CR
25
004
29.70
30,159.80 CR
28
006
450.00
29,709.80 CR
007
450.00
29,259.80 CR
009
37.00
29,222.80 CR
Totals
550.00
39,450.00 CR
99.00
10,876.20
40,099.00
Date of issue: 1 August 20XX
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
39,549.00 CR
29,222.80 CR
Page 1
Page 65 of 78
Statement of account with College Bank
Law & Co
Office account
Account No
987-654-321
DEBIT
$
PARTICULARS
August
1
CREDIT
$
Balance brought forward
BALANCE*
$
29,222.80 CR
4
008
1,980.00
27,242.80 CR
6
002
132.00
27,110.80 CR
12
Chq
19
011
440.00
55.00
22
25
27,550.80 CR
27,495.80 CR
132.00
27,627.80 CR
012
450.00
27,177.80 CR
013
450.00
26,727.80 CR
26
Chqs
576.00
27,303.80 CR
28
Chqs
1,144.00
28,447.80 CR
29
Reversal
440.00
Date of issue: 1 September 20XX
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
28,007.80 CR
Page 2
Page 66 of 78
Compare the July financial institution statement with the July office cash book (pages 24 and 27 of your
Workbook). Note any outstanding deposits or unrepresented cheques.
The financial institution reconciliation for July is set out below.
LAW & CO OFFICE ACCOUNT
Financial institution reconciliation
Financial institution reconciliation as at 31 July 20XX
$
Balance as per FI statement
29,222.80
Add outstanding deposit
CR
Nil
Less unpresented cheques
002
$132.00
008
$1,980.00
010
$27.50
2,139.50
27,083.30
Office account cash book balance 31/07/XX
27,083.30
Q7/15 Now prepare the office financial reconciliation for August.
7.7
Monthly reports
You should now have completed your Workbook and have with it:
1. a bill of costs for Murray
2. a statement of account for Murray
3. a reconciliation with ledger for trust account for August
4. a reconciliation for investment money for August
5. a reconciliation with ledger for office account for August
6. an ADI reconciliation for trust account for August
7. an ADI reconciliation for office account for August.
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7.8
Answers
Balancing the cash book
Q7/1 The correct answer is 3: your practice received $28,390 in July.
The total in the ‘amount on receipt’ column is the total receipts for the month. The total in the ‘banking total’ column
in future months may include a balance brought forward from previous months.
Q7/2 The correct answer is 2: your practice paid $14,520 in trust money in July.
Q7/3 See below.
$
Balance as at 1 August
Plus
Receipts for August
13,870.00
333,000.00
346,870.00
Less
Payments for August
Trust account cash book balance 31/08/XX
342,920.50
3,949.50
Reconciliation with ledger
Q7/4 The correct balance is $440.
Q7/5 The correct balance is $227.
Q7/6 The correct balance is $1,000.
The reconciliation with ledger (trust trial balance) must be prepared within 15 working days of the end of each
month and must record on it the actual date of preparation: ss 44(2) and (3) of the Regulation.
Trust ledger accounts for clients should never have DR balances but most practices do have one ledger account
with a DR balance. Do you know what it is for? Refer to the section notes for more information.
Q7/7 See below.
Show in your heading the effective date ‘as at 31 August 20XX’.
Ledger accounts which have nil balances need not be shown in the reconciliation with ledger.
List all other ledger accounts by account name and matter, showing their balances:
 D Fisher re estate: CR $620
 D Fisher re purchase from Greig: CR $935
 M Murray re purchase from Nguyen: CR $2,934.50
Also show the total of the trust ledger accounts, $3,949.50, the trust account cash book balance and the date of
preparation.
ADI reconciliation – trust
Q7/8 See below.
The balance as per ADI statement is $7,112 CR.
There are no outstanding deposits.
There are two unpresented cheques: 011 in the amount of $330, and 015 in the amount of $2,832.50, totalling
$3,162.50.
When you take $3,162.50 from $7,112, you get $3,949.50, which is the balance as per cash book.
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Investment money
Q7/9 No.
There is no separate cash book for investment money.
Q7/10 No.
Whereas trust money for many clients is in the same trust account, investment money is all held separately – each
account would have its own records.
Q7/11 Yes and no.
The reconciliation is ‘within’ the ledger rather than ‘with’ the ledger. It is not between the investment ledger and a
cash book but between the investment control account (which represents the total of all individual client investment
funds) and the investment ledger accounts for each person.
Q7/12 See below.
LAW & CO
Investment money
Reconciliation as at 31 August 20XX
DR
$
Investment control account
CR
$
328,000.00
Investment account in trust for D Fisher
288,000.00
Investment account in trust for M Murray
40,000.00
328,000.00
328,000.00
Office account
Q7/13 See below.
Office receipts cash book, page 2
Totals, if dishonoured cheque shown in cash receipts book as negative entry:
GST
$
TAXABLE
$
NON-TAXABLE
$
TOTAL ON RECEIPT
$
BANKING TOTAL
$
410.50
4,105.00
169.00
4,684.50
31,767.80
If dishonoured cheque shown on cash payments book, totals in cash receipts book would be:
GST
$
TAXABLE
$
NON-TAXABLE
$
TOTAL ON RECEIPT
$
BANKING TOTAL
$
410.00
4,505.00
169.00
5,124.50
32,207.80
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Office payments cash book, page 2
If dishonoured cheque shown in cash receipts book as negative entry, totals in cash payments book would be:
TOTALS …
$
GST
$
TAXABLE
$
NON-TAXABLE
$
TOTAL AMOUNT
$
5.00
50.00
900.00
955.00
If dishonoured cheque shown on cash payments book, totals would be:
TOTALS …
$
GST
$
TAXABLE
$
NON-TAXABLE
$
TOTAL AMOUNT
$
45.00
450.00
900.00
1,395.00
$
Balance as at 01/08/XX
27,083.30
Plus receipts for August
4,684.50
31,767.80
Less payments for August
955.00
Office account cash book balance as at 31/08/XX
30,812.80
Office receipts cash book, page 3
September 1
Balance brought forward
$30,812.80
Office private ledger account – GST, PL13
If dishonoured cheque shown in cash receipts book as negative entry:
DR
$
Aug 31
Total GST rec’d in Aug
CB2
Aug 31
Total GST paid in Aug
CB2
CR
$
410.50
5.00
CR/DR
BALANCE
$
DR
665.70
DR
670.70
If dishonoured cheque shown on cash payments book:
DR
$
Aug 31
Total GST rec’d in Aug
CB2
Aug 31
Total GST paid in Aug
CB2
CR
$
450.00
45.00
CR/DR
BALANCE
$
DR
625.70
DR
670.70
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Office reconciliation with ledger
Q7/14 See below.
LAW & CO OFFICE ACCOUNT
Reconciliation with ledger as at 31 August 20XX
LEDGER ACCOUNT NAME
ACCOUNT NO/MATTER
DR
$
CR
$
(Your name) – capital
PL1
20,000.00
M Smith – capital
PL2
20,000.00
Telephone
PL3
500.00
Office machines
PL4
3,000.00
Office furniture
PL5
5,000.00
Stationery
PL6
500.00
Postage
PL7
27.00
Office refreshments
PL8
9.50
(Your name) – drawings
PL9
900.00
M Smith – drawings
PL10
900.00
Office rent
PL11
1,800.00
Costs rendered
PL12
GST
PL13
670.70
Incorp Chandos (A8)
20.00
Traffic matter
400.00
Payne and Sanders
J Rowe
4,540.00
13,727.20
Office account cash book balance
31/08/XX
44,540.00
30,812.80
44,540.00
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Q7/15 See below.
LAW & CO OFFICE ACCOUNT
Financial institution reconciliation as at 31 August 20XX
$
Balance as per FI statement
Add outstanding deposit: $2,832.50 (1/9)
Less unpresented cheques: 010 $27.50
28,007.80 CR
30,840.30
27.50
30,812.80
Office account cash book balance 31/08/XX
30,812.80
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Section 8: Complying with further statutory requirements
Records must show the true position in regard to trust money and enable convenient and proper auditing: s 261 of
the Act and s 59 of the Regulation.
Q8/1 Which of the below statements are true and correct?
1. Trust records may be kept manually or on computer.
2. Trust records must be retained for at least seven years.
3. Trust account and investment authorities may be retained on the relevant transaction file.
4. A practice may appoint an external examiner at any time within 12 months of commencing practice.
5. An external examiner has a right of access to all trust records.
6. An external examiner must give notice that he requires access to the trust records.
7. An external examiner is not entitled to examine books, accounts or records other than trust records.
8. An external examiner is entitled to require explanation and information from the partners but not from employed
solicitors of the firm.
9. An external examination must be carried out within two months of the end of the financial year, namely 30 June.
10. All partners must certify whether the accounts are true and accurate.
Q8/2 Are there any circumstances where money may be paid out of the trust account without the direction or
authorisation of any client?
8.1
Prescribed account
Section 258(2) of the Act provides for the withdrawal of trust money for the purposes of deposit into a prescribed
account as prescribed by regulation. The Regulation makes provision for matters relating to such deposits
including the way to work out the amount payable.
Q8/3 What is a prescribed account?
Q8/4 How much must a practice keep on deposit in a prescribed account?
Q8/5 What is a practice’s combined balance?
Q8/6 Does a practice’s trust account balance include an amount in a trust account kept for the exclusive benefit of
an individual?
Q8/7 What exceptions are there to the requirement to keep at least the minimum amount on deposit in a prescribed
account?
8.2
Conclusion
You have now completed the final section in the subject Trust Accounting.
You should now have:
 a sound general knowledge of the significance of, and principles governing, trust and office accounting in legal
practice
 sufficient knowledge, skills and values to maintain trust and office account records according to law and good
practice, to the extent expected of an employed practitioner.
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8.3
Answers
Q8/1 1, 2, 3 and 5 are correct.
1. Section 261 of the Act requires the records to be kept in ‘permanent form’ which is defined in s 237 as being
printed or capable of being printed. Sections 29-32 of the Regulation must be complied with if records are kept
by a computerised accounting system.
2. Records are to be retained for not less than seven years after the last recorded entry or finalisation of the
matter: s 59 of the Regulation.
3. There is no requirement for authorities to be kept separately from files.
4. Incorrect. An external examiner must be appointed within 14 days after receiving trust money: s 267(1). The
Society must be notified of the examiner within 30 days: s 270(1).
5. The examiner is required to externally examine all of the practice’s trust records: s 268(1).
6. There is no such notice requirement under the Act or the Regulation.
7. Incorrect. The external examiner is entitled to examine the affairs of the practice: s 272.
8. Incorrect. There is no such restriction in the Act or the Regulation.
9. Incorrect. The trust account must be externally examined as at 31 March each year. The report must be
forwarded to the Society by 31 May: ss 268(1) and 274(1).
10. Incorrect. There is no requirement for certification under the Act or the Regulation.
Q8/2 The correct answer is yes.
 Section 285 of the Act permits the withdrawal of trust money to be deposited into a prescribed account.
 Section 58(4) of the Regulation permits payment to the practice where the client has been given a bill and (b)(i),
(ii) or (iii) applies.
 Section 713 of the Act requires payment of unclaimed funds to the Public Trustee in certain circumstances.
Q8/3 A prescribed account is an account kept by the Chief Executive, Department of Justice & Attorney-General, at
a financial institution at which trust accounts are kept, for deposits by law practices: s 69 of the Regulation.
Q8/4 Subject to s 70(5), two thirds of the practice’s lowest combined balance at any time during the previous year,
rounded down to the nearest $100: ss 70(2) and (3) of the Regulation.
Q8/5 A practice’s combined balance is the total of the practice’s trust account and prescribed account balances at
that time: s 73 of the Regulation.
Q8/6 No. A practice’s trust account balance is the total of balances in the practice’s trust account at that time, not
including any trust account being kept for the exclusive benefit of a particular person or persons: s 71(2) of the
Regulation.
Q8/7 See below.
 If the combined balance at any time during the previous year was less than $3,000: s 71(5) of the Regulation.
 If the practice needs to withdraw an amount in order to keep the trust account in credit: s 74(1) of the
Regulation.
 From 1 to 20 January, provided the prescribed account balance is at least that required on the previous 31
December: s 75 of the Regulation.
 Prior to 21 January in a year after a practice started practising: s 76(1) of the Regulation.
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Section 9: Additional documents
9.1
Blank trust account primary records
L AW & CO
1182XX
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
TRUST ACCOUNT RECEIPT
Received from:
on:
the sum of:
dollars and
cents $
cheque/cash
for and on behalf of:
(client name)
(matter description and matter reference)
for:
Made out by:
on behalf of:
Law & Co
Solicitors
Trust Account
BANK
THE SUM OF
NOTES
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
(signature)
CHEQUES
as herein
LAW & CO
TRUST ACCOUNT
Account No
TOTAL
$
123 456 789
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
BANK
PLACE
A MO U N T
REC NO
1
2
3
4
5
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BANK
410XX
BANK
Date
Pay
Payee
the sum of
or order
Detail
Law & Co
LAW PRACTICE
TRUST ACCOUNT
Not
Negotiable
$
Chq $
“•410XX ‘•082’”000•’123’456789”•
410XX
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9.2
Blank office account primary records
L AW & CO
707XX
SOLICITORS
181 Ann St
Brisbane 4000
ABN 91 234 567 890
Received from:
by:
the sum of:
dollars
cents
being:
$
:
per
OFFICE ACCOUNT
BANK
THE SUM OF
NOTES
COIN
TELLER
FOR
CREDIT
OF
COMM
PAID
IN BY
(signature)
CHEQUES
as herein
LAW & CO
OFFICE ACCOUNT
Account No
TOTAL
$
987 654 321
Proceeds of cheques, etc, will not be available until cleared
PARTICULARS OF CHEQUES, ETC
D R AW E R
BANK
PLACE
A MO U N T
REC NO
1
2
3
4
5
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 77 of 78
BANK
230XX
BANK
Date
Pay
Payee
the sum of
Detail
Law & Co
OFFICE ACCOUNT
Not
Negotiable
$
Chq $
“•230XX ‘•082’”000•’987’654321”•
230XX
Queensland Law Society | Practice Management Course: Trust Accounting Workbook Questions and Exercises Booklet
Page 78 of 78
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