FAC1503/202/1/2020

Tutorial letter 202/1/2020

Financial Accounting Principles for Law

Practitioners

FAC1503

Semester 1

Department of Financial Accounting

IMPORTANT INFORMATION
This tutorial letter contains important information about your module.
 FAC1503/202

SOLUTION: ASSIGNMENT 01/2020 – FIRST SEMESTER

Unique number: 700523

1. Option 5 – Trust money may be used to pay for the attorney’s practice’s expenses when
the business bank account does not have sufficient funds.

Refer to: Learning Unit 4 – Sections 4.3.2 and 4.4.3 in the study guide.

2. Option 4 – Before a transfer can be made from the client’s trust account, the client must
owe an amount to the law practitioner on their business account.

Refer to: Learning Unit 7 – Sections 7.2 and 7.3 in the study guide.

3. Option 1 – R1 500 (transfer to business bank account)

Refer to: Learning Unit 7 – Sections 7.1 to 7.3 in the study guide.

Calculation:

Clients ledger Trust creditors ledger

(Dr balance before (amount available for Transfer
transfer) current matter)
R R R
Mr Down 10 000 23 500 * 1 500
(1 500 + 10 000 – 1 500) (25 000 – 1 500)
1 500

* The amount transferred is limited to the amount available in the client’s trust creditor’s ledger account,
of R25 000. However, Up Attorneys issued an interim invoice to Mr Down for fees of R10 000, to give
the client an estimate of the fees that will be rendered and levied. Once Up Attorneys obligation has
been met in full, a proper invoice will be issued, and only then, the R10 000 can be transferred, based
on the amount available in the client’s trust creditor’s ledger account.

4. Option 1

1. Client account Trust creditor

balance at account balance at
31 December 2019 31 December 2019
Client R R
T Similane 7 130 12 000
S Ban 10 350 142 440
A Plan 16 790 3 000
Legal Practitioners’ Fidelity Fund 60

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 4 (continued)

Refer to: Learning Unit 4 – Section 4.3, 4.3.1 to 4.3.5, 4.5.4, 4.6.1, 4.6.2, 4.6.2.1, 4.6.2.2 and
Learning Unit 6 – Sections 6.1 to 6.5 and example 6.1 in the study guide.

Interest earned on a trust investment in terms of section 86(4) of the Legal Practice Act, 28 of
2014 will accrue 95% to the S Ban (trust creditor) and 5% to the Legal Practitioners Fidelity
Fund.

5. Option 3 – The law practitioner will be entitled to access the funds held in trust once he
has provided legal services to the client or has incurred expenses on behalf of
the client.

Refer to: Learning Unit 7 – Section 7.1 in the study guide.

6. Option 3 – sec 86(2), sec 86(3) and sec 86(4)

Refer to: Learning Unit 8 – Sections 8.2 and 8.3.

7. Option 1 – R16 000 (transfer to business bank account)

Refer to: Learning Unit 7 – Sections 7.1 to 7.6 in the study guide.

Calculation:

Trust creditors control accounts

Dr M Cut Cr
Date Details R Date Details R
Jul 31 Trust bank TCPJ 3 750 Jul 1 Balance b/d 20 000
Balance before transfer c/d 16 250
20 000 20 000
Jul 31 Mr Cut (transfer) TJ * 16 000 Jul 31 Balance b/d 16 250
Balance c/d 250
16 250 16 250
Aug 1 Balance b/d 250

Clients’ control accounts

Dr M Cut Cr
Date Details R Date Details R
Jul 1 Balance b/d 10 000 Jul 31 Trust creditors (M Cut) c/d * 16 000
31 Fees charged FJ 6 000
Balance before transfer 16 000 16 000

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 7 (continued)

Transfer journal of Lazarus Attorneys

Dr Cr
Date Details Fol
R R
Jul 31 M Cut (trust creditor) * 16 000
M Cut (client) * 16 000
Amount to be transferred from the trust bank account to the business
16 000 16 000
bank account
Debit trust creditors control account 16 000
Credit clients control account 16 000

8. Option 3 – R2 000 (transfer from business bank account)

Refer to: Learning Unit 7 – Sections 7.2 (last bullet point) and 7.3 (2nd last bullet point) in the
study guide.

Calculation:

Trust creditors control accounts

Dr C Hammer Cr
Date Details R Date Details R
Jul 31 Trust bank TCPJ 2 000 Jul 31 Business bank BCPJ 2 000
2 000 2 000

Clients’ control accounts

Dr C Hammer Cr
Date Details R Date Details R
Jul 1 Balance b/d 5 000 Jul 31 Balance c/d 12 000
31 Fees charged FJ 7 000
Balance before transfer 12 000 12 000
Aug 1 Balance b/d 12 000

Transfer journal of Lazarus Attorneys

Dr Cr
Date Details Fol
R R
Jul 31 Business bank (C Hammer - trust creditor) 2 000
Trust bank (C Hammer - trust creditor) 2 000
Amount to be transferred from the business bank account to the trust
2 000 2 000
bank account

9. Option 5 – R7 500 (transfer to business bank account)

Refer to: Learning Unit 7 – Sections 7.1 to 7.6 in the study guide.

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 9 (continued)

Calculation:

Trust creditors control accounts

Dr D Wood Cr
Date Details R Date Details R
Jul 31 D Wood (transfer) TJ * 7 500 Jul 31 Trust bank TCRJ 7 500
7 500 7 500

Clients’ control accounts

Dr D Wood Cr
Date Details R Date Details R
Jul 31 Fees charged FJ 10 000 Jul 31 Trust creditors (D Wood) TJ * 7 500
Balance c/d 2 500
Balance before transfer 10 000 10 000
Aug 1 Balance b/d 2 500

Transfer journal of Lazarus Attorneys

Dr Cr
Date Details Fol
R R
Jul 31 D Wood (trust creditor) * 7 500
D Wood (client) * 7 500
Amount to be transferred from the trust bank account to the business
7 500 7 500
bank account
Debit trust creditors control account 7 500
Credit clients control account 7 500

10. Option 2 – R2 000 (transfer to business bank account)

Refer to: Learning Unit 7 – Section 7.1 (last paragraph) in the study guide.

Calculation:

Trust creditors control accounts

Dr W Nails Cr
Date Details R Date Details R
Jul 31 W Nails (transfer) TJ * 2 000 Jul 1 Balance b/d 6 000
Balance c/d 4 000
6 000 6 000
Aug 1 Balance b/d 4 000

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 10 (continued)
Clients’ control accounts
Dr W Nails Cr
Date Details R Date Details R
Jul 1 Balance b/d 0 Jul 31 Trust creditors (W Nails) TJ * 2 000
31 Tshwane City Council BCPJ 2 000
2 000 2 000

Transfer journal of Lazarus Attorneys

Dr Cr
Date Details Fol
R R
Jul 31 W Nail (trust creditor) * 2 000
W Nail (client) * 2 000
Amount to be transferred from the trust bank account to the business
2 000 2 000
bank account
Debit trust creditors control account 2 000
Credit clients control account 2 000

11. Option 3 – R71 000

Refer to: Learning Unit 7 – Sections 7.1 to 7.6 in the study guide.

Calculation:
Clients’ control accounts
Dr Mr Abramyee Cr
Date Details R Date Details R
Jan 30 Fees charged FJ 9 000 Jan 31 Trust creditors (Mr
Abramyee) c/d * 9 000
Balance before transfer 9 000 9 000

Dr Ms Nkosi Cr
Date Details R Date Details R
Jan 30 Balance b/d 8 000 Jan 31 Trust creditors (Ms Nkosi) c/d * 18 000
Fees charged FJ 10 000
Balance before transfer 18 000 30 000

Dr Mr Potgieter Cr
Date Details R Date Details R
Jan 30 Balance b/d 50 000 Jan 31Trust creditors (Mr Potgieter) TJ * 44 000
Fees charged FJ 66 000 Balance c/d 72 000
Balance before transfer 116 000 30 000
Feb 1 Balance b/d 72 000

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 11 (continued)

Trust creditors control accounts

Dr Mr Abramyee Cr
Date Details R Date Details R
Jan 30 Mr Abramyee (transfer) TJ * 9 000 Jan 30 Balance b/d 10 000
Balance c/d 1 000
10 000 10 000
Feb 1 Balance b/d 10 000

Dr Ms Nkosi Cr
Date Details R Date Details R
Jan 30 Ms Nkosi (transfer) TJ * 18 000 Jan 30 Balance b/d 41 000
31 Balance c/d 32 000
41 000 41 000
Feb 1 Balance b/d 32 000

Dr Mr Potgieter Cr
Date Details R Date Details R
Jan 31 Mr Potgieter (transfer) TJ * 44 000 Jan 30 Balance b/d 44 000
44 000 44 000

Transfer journal of Lazarus Attorneys

Dr Cr
Date Details Fol
R R
Jan 31 Mr Abramyee (trust creditor) 9 000
Mr Abramyee (client) 9 000
Ms Nkosi (trust creditor) 18 000
Ms Nkosi (client) 18 000
Mr Potgieter (trust creditor) 44 000
Mr Potgieter (client) 44 000
Amount to be transferred from the trust bank account to the
71 000 71 000
business bank account
Debit trust creditors control account 71 000
Credit clients control account 71 000

12. Option 2 – R30 000

Refer to: Learning Unit 7 – Sections 7.1 to 7.6 in the study guide.

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

Question 12 (continued)

Calculation:

Trust creditors control accounts

Dr Mr Marapo Cr
Date Details R Date Details R
Jan 25 Trust bank TCPJ 50 000 Jan 1 Balance b/d 150 000
Balance before transfer c/d 150 000 23 Trust bank TCRJ 50 000
200 000 200 000
Jan 31 Mr Marapo (transfer) TJ 30 000 Jan 31 Balance b/d 150 000
Balance c/d 120 000
150 000 150 000
Feb 28 Balance b/d 120 000

Dr Mr Steyn Cr
Date Details R Date Details R
Jan 31 Balance c/d 40 000 Jan 1 Balance b/d 40 000
40 000 40 000
Feb 28 Balance b/d 40 000

Clients’ control accounts

Dr Mr Marapo Cr
Date Details R Date Details R
Jan 31 Fees charged FJ 30 000 Jan 31 Trust creditors (Mr 30 000
Marapo) c/d
Balance before transfer 30 000 30 000

13. Option 3

Trust bank account – R80 000 debit; Trust creditors control account (Poggenpoel & Associates)
– R80 000 credit; Trust bank account – R78 600 credit and Trust creditors control account
(Poggenpoel & Associates) – R78 600 debit.

Refer to: Learning Unit 9 – Sections 9.1 to 9.5 in the study guide.

Mkize Incorporated acts on behalf of Poggenpoel & Associates and thus the instructed
attorney. There will thus not be a trust creditor account or client account for K Jordaan in
Mkize Incorporated’s accounting records.
The instructing attorney Poggenpoel & Associates, will be Mkize Incorporated’s client and trust
creditor account and a client account will be opened for K Jordaan in Poggenpoel & Associates’
ledgers.

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SOLUTION: ASSIGNMENT 02/2020 – FIRST SEMESTER (continued)

14. Option 1 – Your share of fees – R1 900; VAT @ 15% – R855 and R285; Amount owing –
R19 670.

Refer to: Learning Unit 3 – Sections 3.1 to 3.9

Learning Unit 9 – Sections 9.1 to 9.7, and
Learning Activity 5 in the study guide.

15. Option 3 – If a credit balance on the trust creditor accounts exists after the transfer and
the attorney’s responsibilities towards the client have been fulfilled, a business
cheque is issued to the trust creditor.

Refer to: Learning Unit 7 – Section 7.2 (2nd last bullet point) in the study guide.