Accountancy For Lawyers Study Guide - Language Edited 02 April 2020 Final Version ID-1

STUDY GUIDE
Accountancy for Lawyers

Bachelor of Laws (Hons)
CAC 3720
Centre for Open, Distance and e-Learning

Materials Development and Instructional Design Department
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Acknowledgements
The Centre for Open, Distance and e-Learning Materials Development and Instructional Design
Department wishes to thank those below for their contribution to this study guide:
Mr. Marvin Ricardo Awarab Author
Dr Ndatega Victoria Asheela Content Editor
Mr.G Murangii Instructional Designer
Ms Karel Du Plessis Language Editor
Quality Controller
Contents
About this study guide 1
How this study guide is structured ............................................................................................. 1
Course overview 3
Welcome to Accountancy for Lawyers (LCAC 3720) .............................................................. 3
Accountancy for Lawyers CAC 3720 — ................................................................................... 4
Exit Learning Outcomes ............................................................................................................ 4
Time frame ................................................................................................................................. 5
Study skills ................................................................................................................................. 5
Need help? ................................................................................................................................. 6
Assignments ............................................................................................................................... 7
Assessments ............................................................................................................................... 7
Getting around this study guide 8

Margin icons .............................................................................................................................. 8
Unit 1 9
Nature and function of Accounting............................................................................................ 9
Accounting defined .................................................................................................................. 10
The need for financial information .......................................................................................... 11
The nature and aim of accounting ............................................................................................ 12
Forms of business enterpresis ............................................................................................................. ...12
Unit summary........................................................................................................................... 14
References ................................................................................................................................ 15
Unit 2 16
Accounting Rules and Regulations .......................................................................................... 16
Legal Practitioner’s books of record ........................................................................................ 17
Keeping of trust moneys and section 26 investments .............................................................. 19
Accounting requirements: General .......................................................................................... 24

Accounting requirements: trust accounts............................................................................................. ..26
Unit summary........................................................................................................................... 34
References ................................................................................................................................ 34
Unit 3 35
The basic accounting equation ................................................................................................. 35
Financial reporting .................................................................................................................. .36
Accounting Equation ............................................................................................................... 37
Unit summary........................................................................................................................... 49
References ................................................................................................................................ 49
Unit 4 50
Books of Prime entry and Ledger Accounts ............................................................................ 50
Books of Prime Entry............................................................................................................... 50
Ledger Accounts ...................................................................................................................... 60

Trial Balance ............................................................................................................................ 63
Unit summary........................................................................................................................... 67
References ................................................................................................................................ 67
Unit 5 68
Financial Statemets .................................................................................................................. 68
Income Statement..................................................................................................................... 68
Balance Sheet ........................................................................................................................... 71
Unit summary........................................................................................................................... 77
References ................................................................................................................................ 77
Unit 6 78
Investments .............................................................................................................................. 78
Unit summary........................................................................................................................... 85
References ................................................................................................................................ 85
Unit 7 86
Correspondent Accounts .......................................................................................................... 86
Unit summary........................................................................................................................... 93
References ................................................................................................................................ 93
Unit 8 95
Bank Reconciliation Statement ................................................................................................ 95
Unit summary......................................................................................................................... 103

References .............................................................................................................................. 103
Bibliography……………………………………………………………………………………...…..104
About this study guide

Accountancy for Lawyers (CAC 3720) has been produced by the Centre for Open, Distance and e-
Learning. All study guides produced by the Centre for Open, Distance and e-Learning are structured
in the same way, as outlined below.
How this study guide is

structured
The course overview
The course overview gives you a general introduction to the course. Information contained in the
course overview will help you determine:
▪ Why you should study this module:
▪ What you will already need to know.
▪ What you can expect from the course.
▪ How much time you will need to invest to complete the course.
The overview also provides guidance on:
▪ Study skills.
▪ Where to get help.
▪ Course assignments and assessments.
▪ Activity icons.
▪ Units.
We strongly recommend that you read the overview carefully before starting your study.
The course content

The course is broken down into units. Each unit comprises:
▪ An introduction to the unit content.
▪ Unit outcomes.
1
About this study guide The nature
and function of accounting
▪ New terminology.
▪ Core content of the unit with a variety of learning activities.
▪ A unit summary.
▪ Assignments and/or assessments, as applicable.
▪ Answers to Assignment and/or assessment, as applicable
Resources
For those interested in learning more on this subject, we provide you with a list of additional
resources at the end of this study guide. These may be books, articles or web sites.
Your comments
After completing Accountancy for Lawyers we would appreciate it if you would take a few moments
to give us your feedback on any aspect of this course. Your feedback might include comments on:
▪ Course content and structure.
▪ Course reading materials and resources.
▪ Course assignments.
▪ Course assessments.
▪ Course duration.
▪ Course support (assigned tutors, technical help, etc.)
Your constructive feedback will help us to improve and enhance this course.
2
Course overview
Welcome to Accountancy for

Lawyers (CAC 3720)
Accountancy for Lawyers is a module offered in the department of Commercial Law. Its
primary aim is to acquaint law students with the basic accounting principles, especially in
relation to trust accounts. Trust accounts in this context relate to accounting books used
to record transactions relating to clients’ money. In other words, all moneys received and
held by the legal practitioners’ firm and which belong to the clients are recorded in a trust
account (as these moneys belong to the client and not to the business) until such a time
the legal practitioner renders a service and invoices the client.
The Course inter alia covers:
1. The nature and function of Accounting in general and relating to legal practitioners,
including basic Accounting terms and concepts;
2. The Accounting Cycle;
3. Accounting Equation (formula and application);
4. The relevant Accounting principles and procedures in terms of the Legal Practitioners
Act 15 of 1995 and the Namibian Law Society (including the Fidelity Fund);
5. Business moneys/accounts versus trust moneys/accounts;
6. Preparation of elementary financial statements (including Trial Balance);
7. The double entry system and ledger accounts;
8. Books of first/prime entry (recording of basic business transactions);
9. Cash controls and business/trust bank reconciliation procedures (control accounts;
10. Trust investments;
11. Correspondent accounts;
12. Partnership and Companies accounts;
3
Course overview The nature and
function of accounting
13. Accounting requirements and basic financial statements;
14. Interpretation and analysis of financial statements
Accountancy for Lawyers (CAC

3720) — why you should study this
module
As a law student it is imperative that you study this

module. It will help you to understand and appreciate
the difference between business and trust accounts.
This will particularly be helpful, should you open your
own law firm some day or if you get employed as legal
practitioner at one of the law firms. Thus, this module
gives students both the theoretical and practical study
on the principles relating to business and trust
accounts.
Exit Learning Outcomes

The exit learning outcomes for this course are to:
1. Discuss the significance of financial information;
2. Explain the aim and nature of accounting;

3. Discuss relevant sections of the Legal Practitioners 15 of
Exit 1995 in relation to business and trust accounts;
Learning
Outcomes 4. Prepare books of prime entry and post to ledger accounts;
5. Prepare bank reconciliation statements and

supplementary cash books;
6. Prepare financial statements;

7. Prepare adjustment of accounts.
4
Time frame
This course is to be completed over a period of 1 (one) year.
This means, that it will take you about 28 weeks of study to complete the course.
How long? We expect you to spend at least 2 hours per week studying this Course.
Study skills
As an adult learner, your approach to learning will be different
to that from your school days: you will choose what you want
to study, you will have professional and/or personal motivation
for doing so and you will most likely be fitting your study
activities around other professional or domestic
responsibilities .
Essentially, you will be taking control of your learning

environment. As a consequence, you will need to consider
performance issues related to time management, goal setting,
stress management, etc. Perhaps you will also need to
reacquaint yourself in areas such as essay planning, coping
with exams and using the web as a learning resource.
Your most significant considerations will be time and space i.e.

the time you dedicate to your learning and the environment in
which you engage in that learning.
We recommend that you take time now—before starting your

self-study—to familiarize yourself with these issues. There are
a number of excellent resources on the web. A few suggested
links are:
▪ http://www.how-to-study.com/
The “How to study” web site is dedicated to study skills
resources. You will find links to study preparation (a list of nine
essentials for a good study place), taking notes, strategies for
reading text books, using reference sources, test anxiety.
5
Course overview The nature and
function of accounting
▪ http://www.ucc.vt.edu/stdysk/stdyhlp.html
This is the web site of the Virginia Tech, Division of Student
Affairs. You will find links to time scheduling (including a
“where does time go?” link), a study skill checklist, basic
concentration techniques, control of the study environment,
note taking, how to read essays for analysis, memory skills
(“remembering”).
▪ http://www.howtostudy.org/resources.php
Another “How to study” web site with useful links to time
management, efficient reading,
questioning/listening/observing skills, getting the most out of
doing (“hands-on” learning), memory building, tips for staying
motivated, developing a learning plan.
The above links are our suggestions to start you on your way.
At the time of writing these web links were active. If you want
to look for more go to www.google.com and type “self-study
basics”, “self-study tips”, “self-study skills” or similar.
Need help?
For routine enquiries please contact the Student Support
Department at +264 61 206 3416.
Help
For further assistance you can go to your nearest Regional
UNAM Centre.
6
Assignments
Please see tutorial letter for instructions on the
submission of assignments.
Assignment
Assessments
Course materials may have activities and/or self-assessment
exercises to check your own understanding of the material, but
Assessments there are also tutor-marked assignments/tests which you have
to submit. Please see tutorial letter for more details.
7
Getting around this study guide The
nature and function of accounting
Getting around this study guide
Margin icons
While working through this study guide you will notice the frequent use of margin icons. These icons
serve to “signpost” a particular piece of text, a new task or change in activity; they have been included to
help you to find your way around this study guide.
A complete icon set is shown below. We suggest that you familiarize yourself with the icons and their
meaning before starting your study
Activity Additional Answers to Assessment

reading Assessments
Assignment Audio Case study Discussion
Exit Learning Feedback Group Activity Help

Outcomes
Prescribed Recommended
Note it!/Warning Outcomes Reading website
References Reflection Study skills Summary
Terminology Tip Video
8
Unit 1
The nature and function of

accounting
Introduction
Accounting is used in everyday life. Businessmen and women buy and sell items of value on a daily
basis. Legal Practitioners’ firms receive and hold business trust moneys and thus apply the principles of
accounting on a daily basis. Hence, understanding the nature and function of accounting is important.
Upon completion of this unit you should be able to:
▪ discuss the development and the theory of accounting;
▪ outline the need for financial information;
Outcomes ▪ explain the aim, nature and the usefulness of accounting;
▪ discuss the characteristics of the various forms of enterprises.
Du Plooy, S, Gilliland, U and Van Rooyen, J 3rd edition (2016)

Accountancy for Attorneys, LexisNexis, Durban, South Africa
Prescribed
reading
9
Unit 1 The nature and function of
accounting
Adams, G . de Lange, S and Storm A 2nd edition (2017)

Accountancy for Attorneys, , LexisNexis
Additional
reading
1.Accounting principles
This section of the chapter outlines the meaning of accounting and the need for accounting information.
Accounting
Accounting is defined as the language used to communicate financial information in monetary terms to
interested parties. In order to communicate financial information, accounting systems were developed to
systematically record business transactions of an entity and to provide financial information where the
financial performance and financial position of an entity may be determined.1 There are various financial
statements that are used to determine the financial position and the financial result of an entity.
In other words, there are various entities or stakeholders that require accounting information to make their
decisions regarding the workings with the legal practitioner’s firm. The external stakeholders will decide
whether they want to do business with the firm based on the accounting information that relates to a
particular firm and that is readily available to them.
1
Adams, G . de Lange, S and Storm A 2nd (2017) Accountancy for Attorneys, Edition, LexisNexis
10
The need for financial information

Adams, de Lange and Storm (2017) pointed out that all institutions that receive and pay out money need
financial information to determine whether their financial objectives have been achieved. Financial
information assists businesses with decision-making process to regulate and evaluate economic activities.
The financial information must thus be reliable and it is the duty of the accountant or bookkeeper to
provide financial information in an orderly manner.2
Various users, each with unique needs, require accounting information in their decision-making process.
A few examples of users of financial information are the following:
1. Investors and potential investors in the entity use the information to determine whether a good return
can be earned and maintained on the investment.
2. Management of an entity is interested in the financial performance and financial position of the entity
that they manage in order to assess results and to make policy decisions.
3. Long-term creditors, for example the bank, if there are any loans, need to know if the loan will be
repaid.
4. Employees use the financial information to determine how secure their employment is.
5. The government requires financial statements in order to determine the tax liability of the entity.
6. Clients may want to determine whether goods or services will be supplied to them in the future.3
2.The aim and nature of accounting

According to Du Plooy et al. (2016), accounting information is used by various users (mostly
management) for decision-making purposes. From such financial information, the financial performance
and financial position of the entity should be determinable. The financial performance indicates the
performance of an entity and indicates whether profits or losses were made during a specific period,
whereas the financial position of the entity indicates the net worth of the entity at a specific point in time.
Accounting can therefore be defined as a process of identification, classification, measurement and
recording of transactions in a systematic way in order to provide information that can be analysed and
interpreted to facilitate effective decision making.4
2
Adams, G . de Lange, S and Storm A 2nd (2017) Accountancy for Attorneys, Edition, LexisNexis
3
Adams, G . de Lange, S and Storm A (2017) Accountancy for Attorneys, 2nd Edition, LexisNexis
4
Du Plooy et al (2016) Accountancy for Attorneys, LexisNexis, Durban, South Africa
11
Unit 1 The nature and function of
accounting
3.Forms of Business Enterprises

A legal practitioner’s firm is a form of a business enterprise. Depending on his or her needs and interests,
a legal practitioner may decide to adopt a particular form of business enterprise. A legal practitioner needs
to understand the characteristics and operations of each form of business enterprise and, thus, there is a
need to study various forms of business enterprises as outlined below.
3.1.The sole proprietorship

The sole proprietorship, commonly referred to as a one-man business, is a business managed and operated
by only one owner who provides the capital and makes all the decisions. The owner is solely responsible
for the liabilities of the entity and enjoys all the profits made by his business alone. The sole proprietorship
does not constitute a separate legal person and, thus, should the entity run into financial difficulties, the
personal assets of the owner may be sold to settle the debts of the entity, as stated by Adams, de Lange and
Storm (2017).5
3.2.The partnership
The authors further explained that a partnership is formed and managed by at least two persons who are
jointly and severally held liable for the debts and liabilities of the partnership. The maximum number of
partners is limited to twenty persons.
The partnership is regulated by a partnership agreement. This agreement contains provisions that relates
to, amongst others, contributions, profit and loss sharing, participation in the management of the
partnership business, the use of partnership property, salaries, interest on capital contributed, as well as
procedures to be followed for dissolution of the partnership, and admittance and retirement of a partner. A
partnership is not a legal person nor a taxable entity. The income of the partnership is therefore taxable in
the hands of the individual partners.6
3.3.The close corporation

Adams, de Lange and Storm (2017) explain a close corporation as follows: a close corporation (CC) is
regulated by the Close Corporations Act 26 of 1988. The owners are referred to as members and the close
corporation may consist of one to ten members. A close corporation is a legal person and a taxable entity.
Separate legal personality entails that the close corporation is a separate entity from the members that
formed it. The assets of the close corporation belong to the corporation and not to the members that
formed it. The members have limited liability for the debts of the close corporation.7
5
6
7
Adams, G . de Lange, S and Storm A 2nd edition (2017) Accountancy for Attorneys, Edition, LexisNexis
12
3.4.The company
A company is a legal person, governed by the Companies Act 28 of 2004 and its owners are referred to as
shareholders. A company is a legal entity, separated from its shareholders and taxation is paid on profits
by the company at a fixed rate determined annually. As a company is a separate legal person, it is the
owner of its own assets and it is liable for its own debts. Generally, the shareholders of a company are not
personally liable for the debts of the company. The Companies Act provides for two broad types of
companies: profit companies and non-profit companies.8
3.5.The business trust

A business trust can be set up in terms of which assets are transferred by a person who sets up the trust
(called the donor or settlor) to the trustees of the trust to use the assets for purposes of trade or business
for the benefit of the beneficiaries of the trust.
Unit summary
In this unit you learned that accounting is defined as the language used to
communicate financial information in monetary terms to interested
parties. Furthermore, you learned that accounting information is needed
by various users, particularly for decision-making purposes. This unit
Summary further outlines and sets out the characteristics of various forms of
business enterprises.
References
Adams, G . de Lange, S and Storm A 2nd edition(2017) Accountancy for
Attorneys, Edition, LexisNexis
Referenc
es
8
Adams, G . de Lange, S and Storm A 2nd (2017) Accountancy for Attorneys, 2nd Edition, LexisNexis
13
Unit 2 Accounting Rules And
Regulations
Unit 2
Accounting Rules And

Regulations
Introduction
Upon establishing a law firm, every legal practitioner is required to open books of record. The attorney’s
firm is required to record all transactions pertatining to the attorney’s practice in these books of record.
What is of paramount importance is that the attorney’s practice needs to keep a separation between books
used for business transactions and those used for trust transactions.
This chapter aims to outline and discuss rules and regulations relating to business transctions and trust
transactions and the recording of each transaction in the relevant books.
▪ outline rules relating to keeping books of record;
▪ distinguish between business and trust books;
Outcomes ▪ distinguish between business accounts and trust accounts;
▪ explain rules relating to trust accounts and funds;
▪ distinguish between section 26(2) and 26(3) investments.
Legal Practitioner’s Act 15 of 1995

Prescribed Rules of the Law Society of Namibia
reading
14
Du Plooy, S et al (2016) Accountancy for Attorneys, LexisNexis,

Durban, South Africa
Additional
Reading
1.Legal Practitioners’ books of record

Section 25 of the Legal Practitioners Act 15 of 1995 provides for Legal Practitioners’ books of account
and sets out the requirements to be complied with by legal practitioners as follows:
25. (1) Every legal practitioner who in terms of this Act is required to hold a fidelity fund
certificate shall keep, exclusively in respect of his or her practice, such books of account as may be
necessary to show and distinguish in connection with such practice -
▪ moneys received and moneys paid on his or her own account;9

▪ moneys received, held or paid by him or her for or on account of another person;10
▪ moneys invested by him or her in a trust savings or other interest-bearing account referred to in section
26(2) or (3) and interest on moneys so invested which is paid over or credited to him or her;11
(d) any interest on moneys deposited in his or her trust banking account opened in terms of section
26(1) and which is paid over or credited to him or her.12
(2) In order to ascertain whether the provisions of subsection (1) and section 26 have been or are
being complied with, the Council, acting either on its own motion or upon a written complaint lodged
with it, may appoint a registered accountant and auditor who is a member of the Institute of Chartered
Accountants of Namibia to inspect the books of account of a legal practitioner referred to in subsection
(1).13
9
Section 25 (1)(a).
10
Section 25 (1)(b).
11
Section 25 (1)(c).
12
Section 25(1)(d).
13
Section 25(2).
15
Regulations
(3) An accountant and auditor appointed in terms of subsection (2) shall report to the Council in such
a manner as not to disclose confidential information entrusted to the legal practitioner whose books of
account he or she has inspected.14
(4) If, upon an inspection in terms of subsection (2), it is found that the legal practitioner has not
complied with any of the provisions of subsection (1) or of section 26, the Council may recover from the
legal practitioner concerned the costs of the inspection.15
(5) For the purposes of subsections (1) and (2) “books of account” includes any record or document
kept by or in the custody or under the control of a legal practitioner which relates to -
(a) money invested in a trust savings or other interest-bearing account referred to in section 26(2) or
(3) or interest on money so invested;
(b) an estate of a deceased person or an insolvent estate or an estate placed under curatorship, in
respect of which such legal practitioner is the executor, trustee or curator or which he or she administers
on behalf of the executor, trustee or curator; or
(c) such legal practitioner’s practice.16
2.Keeping of trust money and section 26 investments

All legal practitioners who own a private practice and receive money from clients for services rendered or
to be rendered are required to open a separate banking institution in terms of section 26 of the Legal
Practitioners Act.
Section 26 thus sets out the requirements relating to trust accounts as follows:
14
Section 25(3).
15
Section 25 (4).
16
Section 25(5).
16
‘’Every legal practitioner who holds or receives moneys for or on behalf of any person shall open and
keep a separate trust banking account at a banking institution in which he or she shall deposit all such
moneys.17
A legal practitioner may invest in a separate trust savings or other interest-bearing account opened by him
or her with a banking institution or building society moneys deposited in his or her trust banking account
which is not immediately required for any particular purpose.18
(b) A trust savings or other interest-bearing account referred to in paragraph (a) shall contain a
reference to this subsection.19
(3) A separate trust savings or other interest-bearing account -
(a) which is opened by a legal practitioner for the purpose of investing therein, on the instructions of
any person, any moneys deposited in his or her trust banking account by that person; 20 and
(b) over which the legal practitioner exercises exclusive control as trustee, agent or stakeholder or in
any other fiduciary capacity,21
shall contain a reference to this subsection.
(4) A legal practitioner shall, at the time and in the manner prescribed, pay over to the
fund -
17
Section 26(1).
18
Section 26(2)(a).
19
Section 26 (2)(b).
20
Section 26(3)(a).
21
Section 26(3)(b)
17
Regulations
(a) the interest, if any, on moneys deposited in such legal practitioner’s trust banking
account in terms of subsection (1); and22
(b) the interest on moneys invested by such legal practitioner in a separate trust savings or other
interest-bearing account in terms of subsection (2).23
(5) The investment by a legal practitioner of any moneys referred to in subsection (1) in a trust
savings or other interest-bearing account referred to in subsection (2) or (3) shall not relieve such legal
practitioner of any liability in respect of such moneys.’’24
When a legal practitioner approaches a legal practitioner’s firm with a particular legal practitioner, the
legal practitioner will inform the client to do advance payments which payments will be deposited into the
legal practitioner’s trust account. This money technically still belongs to the client as no services have
been rendered. Once the legal practitioner renders a service to the client and invoices a client, then the
legal practitioner can transfer any moneys that he is entitled to for the services rendered to the client, from
a trust bank account to the business bank account.
However, it is possible that the legal practitioner may be of the view that, after the client has paid money
into the trust bank account, such money is not required immediately. All such moneys not required
immediately may be invested with a financial institution and any interest received on such investments
will be paid to other clients or the Law Society Fidelity Fund, depending on the type of investment, i.e.
section 26(2) or 26(3) investment.
For example, Jen approaches Peters Incorporated, a law firm, to assist her with getting a divorce from her
husband John. Upon her consultation, Jen is informed that for all divorce proceedings, clients are required
to pay an amount of N$ 25 000.00. The client pays the required amount in March 2020. The legal
practitioner realises that because of the court roll, Jen’s matter will only be heard in court in August 2020.
The legal practitioner may decide on his own accord to have the N$ 25 000.00 paid by Jen invested into
an interest-bearing account until such a time that the funds will be required and this investment is
referred to section 26(2) investment. Conversely, the client may instruct the legal practitioner to invest on
his or her behalf and this is referred to as section 26(3) investment.
Explain the difference between a section 26(2) and a section

26(3) investment
Activity 1
22
Section 26(4)(a)
23
Section 26(4)(b)
24
Section 26(5)
18
In terms of section 26 (2) investment, the legal practitioner on his own

accord invests money that he receives and holds upon behalf of the client,
and which is not immediately needed for any particular purpose, with a
financial institution. The interest earned on such investment is paid over
Feedback
to the Law Society Fidelity Fund.
However, in terms of section 26(3) investment, the legal practitioner,

with instruction from the client, invests money that he received and holds
upon behalf of the client, and which is not immediately needed for any
particular purpose, with a financial institution. The interest earned on
such investment is paid over to the client.
3. Trust account moneys not part of the assets of legal practitioner
27. (1) Subject to subsection (2), an amount standing to the credit of a legal practitioner’s trust
account shall not -
(a) be regarded as forming part of the assets of the legal practitioner;
(b) be liable to attachment at the instance of or on behalf of a creditor of that legal practitioner.
(2) Any excess amount remaining on a legal practitioner’s trust account after payment of -
(a) all claims of persons whose moneys have, or should have, been deposited or invested in such trust
account; and
(b) all claims in respect of interest on moneys so invested, including a claim of the fund in respect of
interest due to it in terms of section 26(4),
shall be deemed to form part of the assets of that legal practitioner.
19
Regulations
What is the difference between a business bank account and a trust bank account?
Activity 1
Feedback
The business bank account is used to record all business receipts and payments. While the trust bank
account is used to record all moneys received and payment out on behalf of the client.
Offences in relation to trust accounts

In terms of section 31 of the Legal Practitioners Act, ‘’a legal practitioner who contravenes or fails to
comply with any of the provisions of section 25(1) or section 26(1), (2)(b), (3) or (4) shall be guilty of an
offence and liable on conviction to a fine not exceeding N$200 000 or to imprisonment for a period not
exceeding 10 years or to both such fine and such imprisonment.’’
Accounting requirements: General

Rule 17 of the Law Society Rules of Namibia sets out the general accounting requirements pertaining to
the keeping of accounting books and transactions relating to the attorney’s practice. Rule 17(1) of the
Law Society Rules of Namibia read with section 25 (1) of the Legal Practitioners Act requires a legal
practitioner’s firm to keep books of account in the official language of Namibia in such a manner as to
fairly present, in accordance with generally accepted accounting practice, the state of affairs and business
of the firm and to explain the transactions and financial position of the firm.25
25
Rule 17(1).
20
The accounting records shall distinguish in readily discernible form between business account
transactions and trust account transaction.26
A firm shall retain its accounting records
(a) for at least 5 years from the date of the last entry recorded in each particular book or other
document of record;27
(b) except with the prior written consent of the Council, or when removed therefrom under other
lawful authority, at no place other than at its main office or a branch office, but, in the latter case, only
insofar as they relate to its practice conducted at that branch office.28
17. (5) A firm shall regularly and promptly update its accounting records and shall be deemed not to have
complied with this Rule, inter alia, if its accounting records have not been written up and balanced for
more than 30 days or within such shorter period as Council may in any specific situation direct.29
17. (6) Trust money shall in no circumstances be deposited in or credited to a business banking account,
and any money not being trust money at any time found in a trust banking account shall be transferred to
a business banking account without undue delay: Provided that a firm which –
1. makes transfers from its trust banking account to its business banking account at least once a month;
and
2. ensures that each such transfer covers the total amount due to it as at the date of transfer;
shall be deemed to have complied sufficiently with this Rule.30
When making a transfer from its trust banking account to its business banking
account, a firm shall ensure that –
1. the amount transferred is identifiable with and does not exceed the amount due to it; and
2. the balance of any amount due to it remaining in its trust banking account, is capable of identification
with corresponding entries appearing in its trust ledger.31
3. Every firm shall, within a reasonable time after the completion or earlier termination of any mandate,
account to its client in writing, setting out
4. details of all amounts received by it in connection with the matter concerned appropriately explained;
5. particulars of all disbursements and other payments made by it in connection with the matter;
6. fees and other charges charged to or raised against the client and, where any fee represents an agreed
fee, a statement that such fee was agreed;
26
Rule 17(3).
27
Rule 17(4)(a).
28
Rule 17(4)(b)
29
Rule 17(5)
30
Rule 17 (6)
31
Rule 17(7)
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7. the amount due to or by the client and the firm shall retain a copy of each such account for not less
than five (5) years.32
17. (9) A firm shall pay any amount due to a client within a reasonable time, unless otherwise instructed.
It is important that the legal practitioner’s firm keeps a separation between records relating to business
transactions and those relating to trust transactions. If a practitioner’s firm has incorrectly deposited
money into a wrong account, such money must be withdrawn from such an account and deposited into the
correct account. In other words, if a legal practitioner has deposited trust money into the business account,
such money has to be promptly withdrawn from business account and be deposited into the trust account.
Accounting requirements: Trust account transactions
18. (1) A firm referred to in Rule 17 (1) shall promptly on the date of its receipt, or the first banking day
following its receipt on which it might reasonably be expected that it would be banked, deposit in its trust
banking account all money received by it on account of any person.
18. (2) Any amount withdrawn by a firm from a trust investment account shall promptly be deposited by
it in its trust banking account.
18. (3) A firm shall:

a ensure that the total amount of money in its trust banking account, trust investment
account and held as trust cash at any date shall not be less than the total amount of the credit
balances of the trust creditors shown in its accounting records;
b ensure that no account of any trust creditor is in debit;
c employ and maintain a system to ensure that the requirements of paragraphs (a) and (b) are not
infringed when amounts are transferred from its trust banking account to its business banking
account.
18. (4) A firm shall ensure
that amounts received in advance to cover a prospective liability for services rendered or to be rendered or
disbursements to be made, are deposited forthwith to the credit of its trust banking account.
18. (5) A firm shall ensure that withdrawals from its trust banking account are made only
a to or on behalf of a trust creditor;

b as transfers to its business banking account, but only in respect of money claimed to be due to
the firm.
18. (6) A firm shall ensure that:
32
Rule 17(8)
22
(a) any cheque drawn on its trust banking account shall be made payable to or to the order of a payee
specifically designated;
(b) no transfer from its trust banking account to its business banking account is made in respect of
any disbursement or fees of the firm until –
(i) the disbursement has actually been made by the firm;
(ii) the fee has been correctly debited in its accounting records.
18. (7) Every firm shall, at monthly intervals, extract in a clearly legible manner a list of its trust
creditors showing the amount then standing to the credit of each in respect of all money held or received
by it on account of them, and shall total such list and compare the said total with the total of the balance
standing to the credit of the firm's trust banking account, trust investment account and amounts held by it
as trust cash.
18. (8) The amount included in respect of each account in the trust creditors' list referred to in subrule 18
(7) shall be noted in some permanent, prominent and clear manner in the particular ledger account from
which that amount was extracted.
18. (9) Every trust creditors' list compiled in accordance with subrule 18 (7) shall be part of the
accounting records of the firm to be retained for the five (5) year period referred to in Rule 17 (4) (a).
18. (10) Every firm shall –
(a) immediately notify the Director in writing of the name and address of the bank at which its trust
banking account is kept and, in the event of any change of banker, notify the Director immediately of
such change and of the name and address of the new bank;
(b) whenever so required by the Council, furnish to the Council within ten (10) days, or such longer
period as the Council may stipulate, a signed statement issued by the bank or banks at which it keeps its
trust banking account or accounts and trust investment account and a signed statement issued by the bank
or building society at which the firm keeps any trust investment account, certifying the amount of the
balance of such trust banking account or accounts or trust investment account at such date or dates as may
be specified by the Council.
18. (11) A member shall not invest funds on behalf of any person in terms of Section 26 (3) of the Act
without that person's prior specific or general instructions in accordance with the provisions of section 26
(3) of the Act.
4.The Purpose of the Law society fidelity fund

(1) Subject to the provisions of this Act, the fund shall be applied for the purpose of reimbursing
persons who may suffer pecuniary loss as a result of -
23
Regulations
(a) theft committed by a legal practitioner or a candidate legal practitioner attached to, or a person
employed by such a legal practitioner, of any money or other property entrusted by or on behalf of such
persons to the legal practitioner or to such a candidate legal practitioner or a person employed in the
course of the legal practitioner’s practice or while acting as executor or administrator in the estate of a
deceased person or as a trustee in an insolvent estate or in any other similar capacity; and
(b) theft of money or other property entrusted to an employee referred to in paragraph (cA) of the
definition of “estate agent” in section 1 of the Estate Agents Act, 1976 (Act 112 of 1976), or a legal
practitioner referred to in paragraph (d) of that definition, and which has been committed by any such
person under the circumstances, and in the performance of an act, contemplated in those paragraphs,
respectively.
(2) The Fund shall not be applied to reimburse any person as contemplated in subsection (1), unless,
in the case of a theft committed by-
(a) a legal practitioner, the legal practitioner was at the time of the theft the holder of a fidelity fund
certificate or an exemption granted by the Council under section 67(2);
(b) a candidate legal practitioner, the candidate legal practitioner was at the time of the theft attached
to a legal practitioner contemplated in paragraph (a); or
(c) a person employed by a legal practitioner, the legal practitioner by whom such person was
employed at the time of the theft was a legal practitioner contemplated in paragraph (a).
All legal practitioners in private practice belong to a professional body referred to as a Law Society. The
Law Society has a fund known as the Law Society Fidelity Fund. This fund is used to reimburse or
compenstate clients that become victims and lose money in the hands of the legal practitioner or anyone
in his employment. Thus, a client whose money has been lost whilst in the custody of the legal
practitioner, may be compensated through the law society fidelity fund.
The case of Van der Merwe v Director Law Society Namibia and Others33 discusses the principles
relating to the fidelity fund.
33
(A28/2012) [2012] NAHC 149 (06 March 2012)
24
The case of Witvlei Meat (Pty) Ltd and others v Disciplinary Committee for Legal
Practititioners and Others34 focusses on ethical behaviour required of legal practitioners
and disciplinary proceedings against legal practitioners.
(Please study these cases together with the rules).
Exemption of certain legal practitioners from requirement to hold a fidelity fund

certificate
Section 67 provides for instances where a legal practitioner may not be required to hold a fidelity fund
certificate whilst practising. These are:
A legal practitioner who is in the full-time employment of the State or of a law centre or who is not
practising on his or her own account or in partnership or who is exempted under subsection (2) shall,
subject to subsection (3), not be required to obtain and hold a fidelity fund certificate.35
Upon application made to it by a legal practitioner practising or intending to practise as a legal

practitioner for his or her own account or in partnership, the Council may exempt such practitioner from
holding a fidelity fund certificate if -
in the case of a legal practitioner practising or intending to practise on his or her own account, such legal
practitioner furnishes the Council with a written declaration stating that he or she will not in the conduct
of his or her practice accept or receive or hold moneys for or on account of another person; or
in the case of a legal practitioner practising or intending to practise in partnership, such legal practitioner
furnishes the Council with a written declaration signed by every person who is or will be a member of
such partnership stating that neither such partnership nor any member thereof will in the conduct of the
practice of the partnership accept or receive or hold moneys for or on account of another person.36
Any legal practitioner who has been exempted under subsection (2) from holding a fidelity fund certificate
and who in the conduct of his or her practice accepts or receives or holds any money for or on account of
another person, without first obtaining a fidelity fund certificate in accordance with the provisions of section
68 shall not be entitled to any fee, reward or disbursement in respect of anything done by him or her while
34
Case No SA 9/2012
35 Section 67(1)
36
Section 67 (2)
25
Regulations
so practising and shall be guilty of an offence and liable on conviction to a fine not exceeding N$200 000
or to imprisonment for a period not exceeding 10 years or to both such fine and such imprisonment.37
Accountant’s report
Section 20 of the Legal Practitioners Act sets out the rules relating to the reporting requirements by an
accountant as it pertains to the legal practitioners’ books of record.20. (1) Every firm shall at its expense
once in each calendar year, and at such other times as the Council may require, appoint an accountant,
subject to subrule 20 (2), to discharge the duties assigned to him or her in terms of subrule 20 (5) to audit
the firm's trust accounts for compliance with the Act and the Rules.
20. (5) Every accountant who has accepted an appointment in terms of subrule 20 (1) shall -
(a) within 6 months of the annual closing of the accounting records of the firm concerned, or at such other
times as the Council may require, furnish the Council with a report on whether the firm has complied with
the provisions of the Act and these Rules pertaining to trust accounts;
(b) without delay report in writing directly to the Council if, at any time during the discharge of his or her
functions and duties under this Rule -
(i) it comes to his or her notice that at any date the total of the balances shown on trust accounts in the
accounting records of the firm exceeded the total amount of the funds in its trust banking account, its trust
investment account and its trust cash;
(ii) any material queries regarding its accounting records which he or she has raised with the firm have
not been dealt with to his or her satisfaction;
(iii) any reasonable request made by him or her for access to its records or for any authority referred to in
sub-rule 20 (3) has not been met to his or her satisfaction.
From the provisions outlined above, it is clear that each legal practitioner’s firm must appoint an
accountant to audit the books of the firm. Although a legal practitioner may have an accounting
background, it is not permitted for a legal practitioner to audit his or her own books. This position ensures
that there is transparency and guards against the possibility of fraud and money laundering.
It is, however, not wrong for a legal practitioner to review the auditing documents of the firm as he or she
is the overall responsible person and may thus exercise responsibility over the financial affairs of the firm.
Activity 2 Outline the purpose of the fidelity fund.
37
Section 67 (3)
26
Feedback
All legal practitioners in private practice belong to a professional body referred to as a Law Society. The
Law Society has a fund known as the Law Society Fidelity Fund. This fund is used to reimburse or
compenstate clients that become victims and lose money in the hands of the legal practitioner or anyone
in his employment. Thus, a client whose money has been lost whilst in the custody of the legal
practitioner, may be compensated through the law society fidelity fund.
Unit summary
In this unit you learned that every legal practitioner’s practice should
have a business account and trust account and each transaction
should be recorded in the correct books of record. This unit outlines
the provisions relating to business and trust accounts. The business
Summary books are used to record transactions that relate to the business
affairs of the legal practitioner’s firm. While the trust books are used
to record transactions that relate to client’s money, the business cash
book represents the business bank account, while the trust cash book
represents the trust bank account.
References

References
27
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Unit 3
The Basic Accounting Equation

Introduction
The basic accounting equation is the first step in recording any accounting transaction. It denotes the
relationship between assets, owner’s equity and liabilities. One cannot make reference to the basic
accounting equation without studying the double-entry system, which is the foundation of the accounting
equation.
The basic accounting equation forms the basis for all entries in an accounting system. This basic
accounting equation is also used as a teaching aid to explain the analysis and recording of transactions, to
establish accounting concepts and to give insight into the subject.
▪ define the concepts assets, liabilities, owner's equity, financial position

and financial performance
▪ analyse, in tabular form, the effect of transactions on the basic
accounting equation
Outcomes ▪ prepare an elementary statement of profit or loss and statement of
financial position for a sole practitioner

Prescribed
reading
28
Adams, G . de Lange, S and Storm A (2017) Accountancy for

Attorneys, 2nd Edition, LexisNexis
Additional
reading
1.Accounting Entity
The accounting entity is an economic unit that functions independently from its owners. The enterprise,
whether it is a sole proprietorship, partnership, close corporation, company or business trust, must be seen
as an independent unit for accounting purposes. It is of fundamental importance to see the enterprise as an
entity apart from its owner(s) and to view transactions entered into by the enterprise from the perspective
of the enterprise.38
2 Financial reporting
Financial statements are used for the periodic reporting of the financial position and financial
performance of an entity. The financial position is reflected in the statement of financial position (which
is commonly known as the balance sheet) and the financial performance in the statement of profit or loss
(which is commonly known as the income statement).39 The financial statements assist the legal
practitioner’s firm with decision-making.
The financial position and the financial result
The balance sheet is used to determine the financial position of the accounting entity.at a specific time in
respect of assets, liabilities and owner's equity (owner's interest). A balance sheet hence outlines the
capital employed, which indicates how the capital was financed and the employment of capital, which
shows how the capital was utilised.40
38
39
Du Plooy Gilliland and Van Rooyen3rd edition (2016) Accountancy for Attorneys, LexisNexis, Durban, South
Africa
40
Du Plooy Gilliland and Van Rooyen 3rd eidtion (2016) Accountancy for Attorneys, LexisNexis, Durban, South
Africa
29
Regulations
On the other hand, the income statement reflects the financial result of an accounting entity at the end of
the financial year. The financial result is calculated using the income and the expenditure.41
3 Accounting Equation
The basic accounting equation is expressed as follows:
Assets = Owner's equity + Liabilities
A = OE + L
3.1 The financial performance

The statement of profit or loss (income statement) reports on the net profit or loss of an accounting entity
over a specified period, called a financial period, which is usually a financial year. In order to report on
this profit or loss, the income earned during a specified period is shown in the statement of profit or loss,
together with the expenses incurred in respect of the income.
The accounting cycle
The accounting cycle represents the flow of transaction data from the time the transaction arises until it is
reflected in the financial statements and used for analysis, interpretation and decision making. The cycle
can be illustrated schematically as follows:
1. Transaction is entered into;
2. Preparation of source document;
3. Entry into the books of prime entry;
4. Post to ledger accounts;
5. Prepare trial balance;
6. Adjustments;
41
Du Plooy Gilliland and Van Rooyen 3rd edition (2016) Accountancy for Attorneys, LexisNexis, Durban, South
Africa
30
7. Preparation of financial statements;
8. Analysis and interpretation of financial information.
3.2.Transaction
A transaction is an economic activity in which an agreed value item (goods, services or money) is
transferred from one party to another and which has an effect on the amount, nature or composition of an
enterprise's assets, liabilities and/or owner's equity. Every transaction must he expressed in monetary
values before it can he recorded.42
3.3 Assets
An asset is a resource controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity. An item must meet all the above requirements and also meet
the following recognition criteria before the item can be recognised as an asset in the statement of
financial position:
1. it must be probable that the future economic benefits will flow to the entity; and
2. the asset has a cost or value that can be measured reliably.
Assets can he divided into fixed assets and current assets. This distinction is based on the period during
which future economic benefits are expected to flow to the entity.43
Fixed assets (also referred to as non-current assets) are assets that:

1. have a lifespan of more than one year
2. are acquired in order to be used to generate economic benefits for the enterprise
3. are purchased or leased for use and not for resale.
Examples of non-current assets are land and buildings, furniture, equipment, vehicles and a law library.
When an asset is purchased, the cost of the asset includes the purchase price of the asset as well as all
expenses incurred in order to make the asset useful for the purpose for which it was purchased, for
example installation costs of machinery. Fixed assets are also subject to depreciation since the carrying
value of these assets diminishes at the end of each financial period.44
42
43
44
31
Regulations
Current assets are:
cash or assets that can easily be converted into cash in the short term
assets with a lifetime of less than one year.
Current assets are considered to be liquid as they constitute cash, or they can be turned into clients who
owe the entity cash relatively quickly. Examples of current assets are debtors money, cash in bank, petty
cash and stationery on hand. If an entity sells goods, its trading stock would also typically be a current
asset, but this does not apply to an attorney's practice.45
.4 Liabilities
Liabilities represent the enterprise's obligations towards external parties. A liability is:
a present obligation of the entity
arising from past events
the settlement of which is expected to result in an outflow from the entity of resources embodying
economic benefits.46
An item must conform to all the above requirements and should also meet the following recognition
criteria before the item can be recognised as a liability in the statement of financial position:
1. it must be probable that an outflow of resources embodying economic benefits will
result from the settlement of a present obligation; and
2. the amount at which the settlement will take place can be measured reliably.47
The above-mentioned obligations may be enforceable because of a binding agreement or legal

requirement. The creditor has a claim against the assets of the enterprise to the extent of the amount owed
to him or her. Liabilities arise when the enterprise borrows money, acquires assets on credit or when
services are rendered to it on credit.
45
46
47
32
Liabilities can be divided into non-current liabilities and current liabilities. This distinction is based on the
period during which resources embodying economic benefits are expected to flow out of the entity (i.e.
when their settlement will take place).
Non-current liabilities (also referred to as long-term liabilities) are liabilities that will not be redeemed
within a period of one year, for example a loan that is payable over a number of years.
Current liabilities (short-term liabilities) are liabilities that are repayable within a period of one year, for
example creditors, bank overdrafts and accrued expenses.48
5 Owner's equity
The definition of equity in terms of the International Financial Reporting Standards Conceptual
Framework for Financial Reporting is as follows:
Equity is the residual interest in the assets of the entity after deducting all its liabilities. Thus, the net
owner's equity is represented by assets less liabilities. Another way of determining owner's equity, being
the interest of the owner in the entity, is to start with the capital contributed by the owner. This is reduced
by drawings (withdrawals) made by the owner. Owner`s equity then also increases by net profits or
decreases by net losses.
Accordingly, Owner`s Equity = Assets - Liabilities
6 Net profit or Net loss

Net profit or loss is the difference between income and expense.
Income
Income is an increase in economic benefits during the accounting period
Expenses
Expenses are decreases in economic benefits during the accounting period, in the form of outflows or
depletions of assets or incurrences or liabilities that result in decrease in equity other than those relating to
distributions to equity participants (e.g. shareholders).
- the decrease in future economic benefits related to a decrease in an asset or an

increase of a liability must have arisen; and
48
Adams, G . de Lange, S and Storm A (2017) Accountancy for Attorneys, 2nd Edition, LexisNexis Please correct.
33
Regulations
- it must be capable of being measured reliably.
5 The Basic Accounting Equation

Based on the preceding discussion of the definition of assets, liabilities and owner's
equity the basic accounting equation is as follows:
Assets = Owner's equity + Liabilities
Alternatively
OE = A - L
L = A - OE
The following four examples illustrate the concept:
Example 1
E. Eixab withdraws N$ 25 000 from his personal account and deposits it into his business account of E.
Eixab Attorneys as capital. The financial position of the practice will be as follows:
A = OE
Bank = Owner's equity (capital) + Liabilities
+25 000 = +25 000 +0
Comment
The only funds were obtained from the owner (representing equity) and deposited in the bank account
(being an asset). There is no effect on the liabilities.
Example 2
The Eixab as owner of the E. Eixab Attorneys negotiates a loan at the bank for N$ 4 200 and buys
equipment of N$ 1 500. The financial position of the practice will be as follows:
34
Assets = Owner’s Equity + Liabilities
Bank + = 0 + Creditors
+4 200 + 0 = +4 200
Bank
-1 500 0 + 0
Furniture
+1 500 0 + 0
Comment
The bank account, which is an asset, increases because of the funds received from the loan, while the
creditors, which is a liability, increases because the legal practitioner’s practice owes more than it owes
previously.
Example 3
The owner withdraws N$ 2 000 for personal use.
A= Owner’s Equity + Liabilities
Bank= Drawings + 0
-2000 = - 2000 + 0
Comment
The owner withdraws money from the business account and, thus, the business account decreases.
Drawings decreases owner’s equity.
Activity 1
Sort the following elements according to their classifications, by ticking the appropriate box:
35
Regulations
Assets Income Expense Liabilities
Bank
Fees
Bad debts
Stationery
Cash
Creditors
Debtors
Loan at FNB
Feedback
Assets Income Expense Liabilities
Bank x
Fees X
Bad debts X
Stationery X
Cash x
Creditors X
36
Debtors x
Loan at FNB X
Activity 2
a
b State what type of accounts are the following:
c Depreciation
d Prepaid insurance
e Cash in your business account
f Commission receivable
g Land
h Building
i Stationary on hand
j Salaries
k Income received in advance
l Telephone paid
Feedback
a Expense
b Current Asset
c Current Asset
d Fixed Asset
e Current Asset
f Fixed Asset
g Current Asset
h Current Liability
i Expense
Activity 3
37
Regulations
State what you want the students to do. 1 Piet Pistorius Attorneys has recorded the
following transactions in its books of prime entry on during the Month of January 2018.
The owner contributed N$ 102 000 as start-up capital.
Paid N$ 1253 for machinery purchased.
Received N$ 3510 from client Trisha.
Owner withdrew N$ 1520 from the business bank account to pay for his Dstv account
Paid salaries for N$ 1300.
Required: Show effect on the accounting equation
Feedback
Assets = Owners Equity + Liabilities
Bank + 102 000 Capital + 102 000
Machinery +1253
Bank -1253
Bank + 3510
Trisha -3510
Bank -1520 Drawings -1520
27. Bank -1300 Salaries -1300
38
Unit summary
In this unit you learned about the basic accounting equation. This unit
explained the effect of various transactions of the accounting equation.
You are now able to prepare a basic accounting equation.
Summary
References
Du Plooy, S et al 3rd edition (2016) Accountancy for Attorneys,
LexisNexis, Durban, South Africa
Referenc
es
39
Regulations
Unit 4
Books of prime entry and posting to

ledger accounts
Introduction
The preceding chapters dealt with accounting concepts, the basic accounting equation and the accounting
rules pertaining to the legal practitioners’ business and trust accounts. This chapter provides elaborate and
practical explanations of the recording process of transactions taking place at a legal practitioner’s firm.
▪ list the books of prime entry;

▪ identify source documents;
▪ record transactions in the books of prime entry;
Outcomes ▪ post entries from the books of prime entry to ledger accounts;
Du Plooy, S 3rd edition(2016) Accountancy for Attorneys,

Prescribed
reading

Accountancy for Attorneys, Edition, LexisNexis
Additional
reading
40
1.Books of Prime Entry

Books of prime entry are used to record transactions that take place at the legal practitioner’s practice
before any posting can be made to the ledger accounts.
The books of prime entry provide the following benefits:

1. They serve as a link between the source document and the ledger account.
2. A chronological record of transactions is provided.
3. Possible recording mistakes are reduced.
4. The distribution of work is facilitated.
There are various books of prime entry namely:

1. Business cash book
2. Trust cash book
3. Petty cash book (for business purposes only)
4. Fees journal
5. Sheriffs journal
6. General journal
7. Transfer journal
2.Source Documents
The conclusion of a transaction leads to the second step in the recording process, namely the preparation
of a source document. For each type of a transaction, a specific document is prepared as voucher for the
recording of a transaction in the appropriate book of prime entry.
Examples of source documents are inter alia, invoices, receipts, petty cash vouchers, cheque counterfoils,
and deposit slips.
List 5 books of prime entry.
Activity
41
Regulations
Business cash book
Trust cash book

Feedback
Petty cash book (for business purposes only)
Fees journal
Sheriffs journal
General journal
Transfer journal
3.Cash book
There are two forms of cash books used to record transactions in the legal practitioner’s practice, namely,
the business cashbook and trust cash book. The business cash book is used to record all business receipts
and payments. In other words, all the moneys’ receipts in the business’s bank account and all payments
made from the business bank account are recorded in the business cash book. Thus, the business cash
book represents the business bank account.
Each cash book has a debit and a credit side. All moneys received by the business are recorded on the
debit side of the cash book, while the credit side of the cash book is used to record payments made from
the business bank account.
Each cash book recording begins with an opening balance and ends with the closing balance. The closing
balance of one month becomes the opening balance of the following month.
In order to close off the cash book of each month, the cash book must be properly balanced off.
Example of a cash book
Transactions:
JJ Pienaar has entered into the following transactions for the month of May 2019:
1. Capital contribution of N$ 50 000
2. Bought office stationery and paid by cash N$ 3 000
3. Bought equipment, N$ 12 000
4. Received a cheque from client A to settle her account, N$ 2 000
5. Paid office rent, N$ 10 000
6. The cheque received from client A was dishonoured by the bank
7. Required: Record the transactions in the books of prime entry:
42
Business cash boo k JJ Pienaar for May 2019
Dr Cr
Capital 50 000 Stationery 3 000
Client A 2 000 Equipment 12 000
Rent 10 000
Cheque (R/D)-Client A 2 000
31. Balance (c/d) 43 000
_______ _______
70 000 70 000
_______ _______
1 Jun Balance 43 000
Activity
John Peters, an attorney opens his practice and enters into the following transactions:
2017
March 1 Obtains a loan to finance his practice of N$ 15 000 from Investec
2 Pays his first month’s rent of N$ 3 500 and a deposit in terms of the lease for N$ 2
500
Buys furniture to the value of N$ 10 000 and pays by cheque.
Issues an invoice to Mr Sam for N$ 5000 for fees in respect of services rendered
Returns damaged furniture and receives a cheque for N$ 1 500
10. Mr. Sam queries his invoice and John Peters gives him a reduction of N$ 500
13. Mr Sam pays his account in full.
43
Regulations
14. Buys stationery to the value of N$ 1 200
21. Issues an invoice to Mr Jack for N$ 6 000
25. Mr Jack pays N$ 4 500 off his account.
31 Pays salaries of N$ 3000 and telephone of N$ 700
31 Investec charged interest on loan of N$ 150
31. He makes his first payment on the loan of N$ 650.
Required:
Record the above in the following books:

1. Cash Book
2. Ledger Accounts
3. Extract a trial balance
Feedback
Business Cash Book of John Peters Attorneys
Date Details Discount Amount Date Details Discount Amount

(receipts) Received (Payments) Received
March Investec 15 000 March Rent 3 500

1 2
8 Furniture 1 500 2 Rent 2 500

deposit
13 Sam 4 500 4 Furniture 10 000
25 Jack 4 500 14 Stationery 1 200
31 Salaries 1 200
31 Telephone 3 000
44
31 Investec 700
31 balance 3 950
25 500 25 500
1 Balance 3 950
BUSINESS LEDGER
Loan-Investec
March 31 Bank 650 March 1 Bank 15000
31 Balance 14 300 31 Interest 150
______ ______
15150 15 150
Balance b/d 14 300
Rent
March 2 Bank 3 500
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Regulations
Rent Deposit
March 2 Bank 2 500
Furniture
March 2 Bank 10 000 March 8 Bank 1 500
31 Balance 8500
_____ ______
10 000 10 000
1 Balance 8 500
Debtor Sam
March 8 Fees 5000 March 10 Credit 500
13 Bank 4 500
_____ _____
5 000 5 000
Fees
March 10 Credit 500 March 8 Sam 5000
31 Balance 10 500 13 Jack 5 000
46
_____ _____
11 000 11 000
1 Balance 10 500
Stationery
March 14 Bank 1 200
Debtor Jack
March 21 Fees 6 000 March 10 Bank 4 500
31 Balance 1 500
_____ _____
6 000 6 000
1 Balance 1 500
Salaries
March 31 Bank 3000
47
Regulations
Telephone
March 31 Bank 700
Interest on loan
March 31 Investec 150
Trial Balance
Details DR CR
Loan Investec 14 300
Rent 3 500
Rent deposit 2 500
Furniture 8500
Fees 10 500
Stationery 1 200
Debtor Jack 1 500
Salaries 3 000
Telephone 700
Interest on loan 150
Bank 3800
24 850 24 850
48
4.Petty Cash Book

Enterprises often make small payments for expenses such as postage, milk, tea and stationery that have to
be paid for in cash. For this reason, most businesses keep a cash amount on hand for petty cash
payments.49
The petty cash of an attorney’s practice is also used for small expenses paid for by an attorney on behalf
of his or her clients, for example registration of postal items, that are usually recovered from clients at a
later stage. In order to be able to determine the exact amount of the debt due by the client in this regard, it
is important that the petty cash book is kept up to date and the accurate posting is done to the respective
accounts of the business.50
5.General journal
A general journal is used to record all transactions where there is no flow of money. Thus, a general
journal will most commonly be used to record all credit sales as well as credit purchases.
When a legal practitioner renders services to a client and sends a fees statement to the client, such a
transaction will be recorded in a general journal. On the other hand, when a legal practitioner purchases
an item on credit with the agreement to pay later, such a transaction will also be recorded in a general
journal. The debit side of general journal should be equal to the credit side of general journal.
When recording transactions in a general journal it is important to provide a short narration at the end of
each transaction and underline it.
Other types of specialised journals comprise of: Debtors Journal (also known as Sales journal) used for
credit sales and Creditors Journal (also known as Purchases journal) used for credit purchases. However,
in this module, students will only be required to prepare general journal, where all credit transactions are
to be recorded.
Example:
May 2019
The owner, A. Burger, bought machinery on credit for N$ 2000 from credit purchasers.
Required: Record the above transaction in the book of Prime entry.
Date Details Debit Credit
4 Machinery 2 000
Credit Purchasers 2000
Bought
machinery on credit
49
50
49
Regulations
Comment: Machinery is debited, because it is an asset and assets increase on the debit side; while
credit purchases are credited, because they are liabilities, and liabilities increase on the credit side.
Example:
June 2019
The owner, C. Denzel, rendered services to client Peter for N$ 5 000 and sent an invoice
Date Details Debit Credit
7 Peter 5 000
Fees 5000
Charged client fees

for services rendered.
Comment: Peter is debited, because Peter is an asset and assets increase on the debit side, while fees
form part of the owner’s equity, and owner’s equity increases on the credit side.
6.Ledger Accounts
The ledger accounts give effect to the double entry system. For every debit entry, there must be a
corresponding credit entry. This is an accounting principle and must be adhered to at all times
Each account has a left side and a right side, and an account name and an account number is allotted to
each account.51
The ledger is a collection of accounts in which all the transactions of an enterprise are recorded. The
account is in the form of a capital "T", henceforth the term "T-account". The name of the account is
written above the horizontal line of the "T" and the amount of the transaction is written on the left or right
side of the vertical line of the "T".52
51
52
50
The left side of the account is called the debit side and the right side is called the credit side.
Example of a ledger account (T-account)
The owner bought machinery for N$ 500
Bank
Machinery 500
Machinery
Bank 500
As reflected above, ledger account takes the form of a T, and thus it is commonly referred to as a T-
account. For every debit entry, there must be a credit entry.
Remember the basic accounting equation:
A = OE + L
There are some accounts that increase on the debit side and decrease on the credit side. Similarly, there
are other accounts that will increase on the credit side and decrease the debit side. It is thus important to
be able to identify the type of account, classify it and also to know its effect on the accounting equation.
Assets:
Assets appear on the left side of the equation, whereas owner's equity and liabilities appear on the
right side of the equation. This means that assets have balances on the debit side (left side) of an account,
whereas owner's equity and liabilities have balances on the credit side (right side) of an account.53
53
Adams, G . de Lange, S and Storm A 2nd edition (2017) Accountancy for Attorneys, 2nd Edition, LexisNexis
51
Regulations
The balance of an account increases on the same side and decreases on the opposite side as that on
which it appears in the basic accounting equation. This means that assets increase on the debit side (left
side) of the account whereas assets decrease on the credit side (right side) of the account. The opposite
applies to owner's equity and liabilities, which increase on the credit side (right side) of the account, whereas
they decrease on the debit side (left side) of the account.54
In short:
Assets increase on the debit side and decrease on the credit side.
Owner’s equity increases on the credit side and decreases on the debit side
Liabilities increase on the credit side and decrease on the debit side.
7.Preparation of A Trial Balance

The purpose of a trial balance is to check the arithmetic accuracy of all entries in the Ledger accounts. In
other words, a trial balance is prepared to determine whether the double entry system was correctly
applied. For every debit entry, there must be a corresponding credit entry.
Example of a trial balance

1. The owner contributes N$ 5000 as start-up capital
2. Pays rent N$ 2500
3. Charges client Ben fees, N$ 3 000
4. Receives N$ 3000 for services rendered to client Ben
Trial balance
Details Debit Credit
Bank 5 500
Capital 5 000
54
52
Rent 2 500
Fees 3 000
8 000 8 000
Comments:
Before you prepare a trial balance, you must record transactions in the ledger accounts:
Thus:
Bank
Capital 5 000 Rent 2 500
Ben 3 000 Balance c/d 5 500
_8 000 8 000
Balance b/d 5 500
Rent
Bank 5 000
Ben
Bank 3 000 Fees 3000
53
Regulations
Ben does not appear in the trial balance because his account is zero. The debit side and credit side of
Ben’s account cancels out each other.
Activity
1. Owner P. Pieters withdraws N$1500 from his personal bank account and deposits it into his business
account to commence his business practice.
2. Owner withdraws N$1200 from business bank account for his personal use.
3. JJ’s legal practitioners renders services to a client and receives a cheque for N$ 3000.
4. Paid water and electricity for N$ 4 300.
5. Bought machinery on credit from credit purchasers for N$ 17 400.
Required:
1. Show effect on the accounting equation.
2. Prepare ledger accounts.
Feedback
The effect on the accounting equation:
Bank +1 500 Capital +1 500
Bank -1 200 Drawings -1 200
Bank +3 000 Income + 3 000
Bank -4 000 Water and Electricity -4 000
Bank -17 500
Machinery +17 500
54
Ledger Accounts
Bank
Capital 1 500 Drawings 1 200
Income 3 000 Water and Electricity 4 000
Balance c/d 17 700 Machinery 17 000
22 200 22 200
Balance b/d 17 700
Capital
Bank 1 500
Income
Bank 3 000
Water and electricity
Bank 4 000
Machinery
Bank 17 000
55
Unit 5 Financial Statements
Unit summary
In this unit you learned how to record transactions in the books of prime
entry and refer same to ledger accounts.
Summary
References
Adams, G . de Lange, S and Storm A (2017) Accountancy for Attorneys,
2nd Edition, LexisNexis
Referenc .
es
56
Unit 5
Financial statements
Introduction
Financial statements are used to determine the financial position and financial result of a business
entity.
The income statement and balance sheet are the two financial statements of the business entity. The
income statement is used to determine the financial result of an entity and this is done using the
income and expenditure of the business, that is income less expenses equals net profit or net loss. The
balance sheet determines the financial position of an entity and it comprises of assets, owner’s equity
and liabilities.
▪ name two types of Financial statements
▪ outline the purpose of two types of Financial statements;
s ▪ prepare Income statement
▪ prepare a balance sheet
Du Plooy, S 3rd edition (2016) Accountancy for Attorneys,

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Accountancy for Attorneys, Edition, LexisNexis
Additional
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1.Income Statement
The income statement of an entity is a financial statement. It determines the financial result of an
entity and it indicates the income and the expenses of an entity. All income and expenses are taken
into account when calculating the Net Profit or Net Loss of the entity.
The following accounts make up an income statement:
Sales, Purchases, Opening Stock, Closing Stock, Income (for example: Rent income, Commission
received, Bad debts recovered, Dividends received) and Expenses (for example: Rent expense, Bad
debts, salaries, wages, telephone, stationery, water and electricity, postage) .
Steps in preparing an Income Statement:
Step 1:
How to get gross profit:
Sales - Cost of sales = gross profit
Hint: Opening Stock + Purchases - Closing Stock = Cost of Sales
Activity
Using the following information, prepare an Income Statement of Piet Van Rensburg for the financial
year ending on 28 February 2017
58
Salaries and Wages 31 000
Telephone and Postage 2 000
Insurance 2 550
Stationery 440
Bad debts recovered 310
Advertisements 2 230
Fees Earned 20 000
Bank charges 200
Electricity 7 000
Bad debts 310
Depreciation 4 000
Rent Income 8 400
Sales 43 200
Opening Stock 10 000
Closing Stock 14 000
Purchases 6000
Feedback
Income Statement of Peit Van Rensburg for the financial year ending on 28 February 2017
N$
43 200
Sales
2 000
Less Cost of Sales
10 000
Opening Stock
6 000
Add Purchases
59
14 000
Less Closing Stock
41 200
Gross Profit
29 460
Income
20 000
Fees earned
8 400
Rent income
510
Commission earned
500
Bad debts recovered
70 660
Gross Income
49 730
Less: Expenses
Salaries and Wages

31 000
Telephone and Postage
2 000
Insurance
2 550
Stationery
440
Advertisements
2 230
Bank charges
200
Electricity
7 000
Bad debts
310
Depreciation
4 000
20 930
Net profit for the year
4.Balance Sheet
The balance sheet of an entity is a financial statement. It determines the financial position of the entity
and it indicates the assets and liabilities of the entity at a given point in time.
60
The balance sheet includes Assets (both fixed assets and current assets), Capital, Liabilities (both
short-time and long-term). The balance sheet consists of two sections, namely: the Capital Employed
Section and the Employment of Capital Section.
Steps to prepare a Balance sheet:
Capital Employed:
Owner’s Equity = Capital + Net Profit + Add long-term long-Drawings
Employment of Capital:
Fixed Assets + Working Capital
(Hint: Working Capital = Current Assets - Current Liabilities)
Activity
Trial balance of Zanzi Bar Attorneys at business at 30 April 2018
Details Dr Cr
Bank 5000
Debtors 3000
Creditors 750
Capital 40 200
Office Equipment 15 000
Machinery 9 200
61
Premises at Cost 35 000
Long –term Bank Loan 15 000
82 200 82 200
Additional information:
Net Profit from Income Statement: N$ 11 250
REQUIRED: Prepare the Balance Sheet for Zanzi Bar Attorney as at 30 April 2018.
Feedback
Capital Employed 66 450
Owner’s Equity
Capital 40 200
Add Net Profit 11 250
Add Long-term Loan 15 000
Employment of Capital
Fixed Assets
62
Equipment 66 450
Machinery 59 200
Premises 15 000
9 200
Add Working Capital 35 000
Current Assets
Bank 7 250
Debtors 8 000
Less: Current Liabilities 3 000
Creditors 5 000
750
Activity
Jay John’s assets and liabilities are as follows:
Machinery at cost N$ 120 000, vehicle at cost N$ 70 000, stock N$ 20 000, debtors N$ 10 000,
creditors N$ 8 000, bank balance N$ 2 000, Capital N$ 214 000.
REQUIRED: Prepare balance sheet as at 31 December 2016.
Feedback
63
Capital Employed 214 000
Owner’s Equity
Capital 214 000
Employment of Capital
Fixed Assets 190 000
Machinery 120 000
Vehicle 70 000
Add Working Capital 24 000
Current Assets 32 000
Stock 20 000
Debtors 10 000
Bank 2 000
Less: Current Liabilities
Creditors 8 000
Unit summary
In this unit you learned that there are two financial statements, namely the
income statement and the balance sheet. You also learned how to prepare
the income statement and the balance sheet to indicate the financial
position and the financial result respectively.
64
References
Du Plooy, S 3rd edition(2016) Accountancy for Attorneys,

65
Unit 6
Investments
▪ record investments in terms of section 26(2) and (3) of the legal

Practitioners Act 15 of 1995
▪ record the interest on these respective trust investments
Outcomes
Du Plooy, S 3rd edition (2016) Accountancy for Attorneys,

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Accountancy for Attorneys, , LexisNexis
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reading
Introduction
In accordance with the provisions of section 26 of the Legal Practitioner’s Act, a Legal Practitioner
may invest the funds received from a client and held in the trust banking account with a banking
institution, provided that such funds are not urgently required for any particular purpose. Interest
earned on such investment can be paid over to the client or to the fidelity fund, depending on whether
the investment was made on the legal practitioner’s own accord or on the instruction of the client.
66
If the client instructs the legal practitioner to invest money, it is referred to as a section 26(3)
investment and interest goes to the client. If the legal practitioner invests trust funds on his own
accord, such an investment is referred to as section 26(2) investment and the interest is paid over the
Law Society Fidelity Fund.
The investment accounts are prepared in the form of ledger accounts also known as the T-accounts.
You are holding N$ 463 418 in your trust banking account which
includes N$ 150 000 on behalf of your client Henry. You have Henry’s
written consent to invest the amount on his behalf with African Bank and
you decide to invest a further N$ 200 000 in an ABC Bank interest
bearing account.
You later withdraw the investment funds and redeposit amounts of N$

152 000 and N$ 205 000 respectively into your trust banking account.
You pay the beneficiary the interest amounts they are entitled to.
Required:
Record the appropriate transactions in your trust cash bank

account and ledger accounts.
Feedback
Trust Cash Book
67
Balance 463 416 African Bank 150 000
African Bank 152 000 ABC Black 200 000
ABC Bank 205 000 Henry 2 000
Fidelity Fund 5 000
Balance c/d 463 418
________
________ 820 416
820 418 ________
________
Balance b/d 463 418
Trust Ledgers
Henry
Bank 2000 Balance 150 000
Balance 150 000 Interest 2000
________ ________
152 000 152 000
_________ __________
Balance 150 000
Others
68
Trust Bank 313 418
Section 26 (3) Investment-Henry
African Bank 150 000 Trust Bank 150 000
Section 26 (2) Investment-Others
ABC Bank 200 000 ABC Bank 200 000
Fidelity Fund
Bank 5000 Interest 5000
Activity
Your trust creditors as at 30 June 1996 total N$ 500 000. An examination of these trust creditors are
made up as follows below:
69
(a) Your client, Mrs Black, has instructed you to invest the sum of N$ 100 000 (which you hold in
trust) in an interest-bearing account for her benefit, pending transfer of an immovable property.
(b) You invest the N$ the 100 000 with the Phoenix Bank.
(c) When you close the account you receive a cheque of N$ 101 000 and you issue a cheque for the
interest of N$ 1 000.
3. (a) Your client, Mrs Green, instructs you to invest her N$ 200 000 (which you hold in trust) in unit
trusts.
(b) You invest in the unit trust and retain the documentation in your client’s file.
4. (a)You decide to invest the sum of N$ 150 000 of your surplus trust funds in an interest bearing
account with Phoenix Bank.
(b) When you close the account you receive a cheque for N$ 152 000.
(c) You issue a cheque for the interest of N$ 2000.
Required:
Reflect all the aforesaid transactions in the bank account and trust ledgers.
Trust Bank Account
Balance 500 000 Phoenix Bank 100 000
Phoenix Bank 101 000 Mrs Black 1000
Phoenix Bank 152 000 Unit Trust 200 000
Phoenix Bank 150 000
Fidelity Fund 2000
Balance c/d 300 000
________ ________
70
753 000 753 000
________ ________
Balance b/d 300 000
Trust Ledgers
Mrs Black
Bank 1000 Balance 100 000
Balance 100 000 Interest 1000
________ ________
101 000 101 000
__________
Balance 100 000
Section 26 (3) Investment-Mrs Black
Trust Bank 100 000
Phoenix 100 000
Mrs Green
Unit Trust 200 000 Trust Bank 100 000
Others
71
Trust Bank 200 000
Section 26 (2) Investment-Others
Phoenix 150 000 Trust Bank 150 000
Fidelity Fund
Bank 2000 Interest 2000
Unit summary
In this unit you learned about section 26(2) and section 26(3) investment.
This chapter also provided practical examples as to how to prepare
section 26 investments, which are prepared using ledger accounts.
References
Du Plooy, S 3rd edition (2016) Accountancy for Attorneys, LexisNexis,
References Adams, G . de Lange, S and Storm A 2nd edition (2017) Accountancy

for Attorneys, , LexisNexis
Legal Practititoners Act 15 of 1995 (Section 26 (2) and (3)
72
73
Unit 7
Correspondent accounts
Introduction
Legal Practitioners often used other legal practitioners as correspondents to assist in
legal matters. For instance, if the legal practitioner’s client is based in Oshakati and
the legal practitioner is based in Windhoek, that particular legal practitioner may decide
to use another legal practitioner to assist with the matter, as that practitioner is closer
to the client. The legal practitioners as referred to as the instructing attorney and the
instructed attorney.
▪ explain the difference between the instructing and instructed attorney;
▪ explain t he importance of a correspondent;
Outcomes ▪ draft the account statement;
Du Plooy et al 3rd edition (2016) Accountancy for Attorneys,

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1.Difference Between Instructing And Instructed Attorney

In practice, legal practitioners are on a continuous basis giving instructions to another by means of
correspondence.55 The instructing attorney is the attorney’s practice issuing the instructions while
instructed attorney is the attorney’s practice receiving the instructions. The correspondents are treated
as clients in the books of the other correspondent. 56
A business account is opened in the books of the instructing attorney and the instructed attorney, as
well as a trust creditors account for the other correspondent in the case of trust moneys, received.57
Items that are normally included in the correspondent account include the following:
Collections
An attorney is allowed 15% collection commission.
Fees charged:
Every instruction varies according to the type of fee charged, depending on the time taken to execute
the instruction. The following fees may be charged for:
• Receiving of the instruction
• Preparing of summons
• Collections
55
Du Plooy, S, et al 3rd edition (2016) Accountancy for Attorneys, LexisNexis, Durban, South Africa
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57
75
• Correspondence and court notices
The below is a statement used to prepare a correspondent account.
N$ N$
M Melbourne v P Perth 3 000
Moneys collected 185
Sheriff cost 400
Fees for receiving instruction 120
Fees for preparing of admission of guilt 26
10% collection fee 50
VAT at 14% 300
Your 1/3 allowance 125
Cheque attached herewith
B Brishbane vs A Brisbane 42
Advocate costs in divorce case 2 135
Sheriff costs 300
VAT at 14%
Your 1/3 allowance 240
Amount owing 15
42
3 938
14
100
76
483
3 938
Required:
Prepare the correspondent account
Feedback
Melbourne vs Perth
Fees charged:
10% collection fees of N$ 300 300
Fees for preparing the summons 120
Correspondence 26
Fees for drafting admission of guilt 50
Total fees charged 896
Expenses 185
Expenses plus fees 1081
77
VAT on fees (N$ 896 x 14%) 125
Total expenses, fees and VAT 1206
1/3 allowance (1/3x N$ 896) 299
VAT (1/3x N$ 125 or 14%x N$ 299) 42
Allowance plus VAT 341
Your correspondent instructs you in the following matters:
1. To collect N$ 5 000 from Enver for his client Cassim. You

Activity charge an instruction fee of N$ 60. You pay a tracing agent
N$200 from your business account. Enver pays N$ 2 000
and you charge a collection fee of N$ 200.
2. To collect N$2 000 from Romeo for his client Juliet. You
charge an instruction fee of N$60, and a letter of demand
and summons fee of N$200. Romeo pays N$1 000 and you
charge a collection fee of N$1 000
You are required to:
1. Record the transactions in your accounting records.
2. Transfer whatever you are entitled to transfer, to your

balance account.
Account fully to correspondent and prepare an accounting

statement.
3.
78
Unit summary
The correspondence between attorneys is very important as it assists
clients with attaining justice and legal advice, even though the instructing
attorney is not located in their area of jurisdiction.
Summary
References
Du Plooy, S 3rd edition (2016) Accountancy for Attorneys, LexisNexis,
References . Adams, G . de Lange, S and Storm A 2nd edition (2017) Accountancy for
Attorneys, , LexisNexis
79
Unit 8
Bank Reconciliation Statement
Introduction
In the attorney’s practice, there is always a flow of cash. In other words, there is always cash receipts
and cash payments. Therefore, it is important to have an effective control system over cash receipts
and cash payments. This unit thus focuses on cash control over cash received, control over cash
payments and bank reconciliation.
▪ outline the purpose of preparing the bank reconciliation

statement;
Outcomes
▪ prepare a bank reconciliation statement
▪ prepare the Supplementary Cash Book

Prescribed
reading
80

Additional
reading
1. Control over cash received

Money is received by the attorney’s practice in various ways and for various purposes. Cash is
received from clients for services rendered. Money is also received as interest received on investment
and capital contributions by the owner.
The guidelines for internal control over cash receipts include:

1. At least two persons should be present during the opening of the daily mail.
2. The details of cash receipts are recorded daily in a remittance register and the persons responsible
for the opening of the mail should initial next to the specific receipt in the register.
3. Cash received is allocated to business and trust receipts as identified by the appropriate attorney
involved.
4. This cash is immediately sent to the persons responsible for issuing of receipts and bank deposit
slips and the keeping of the business and trust cash books.
5. An independent person should daily reconcile the information on the deposit slips and that of the
remittance register.
2.Control over cash payments

Payments in the attorney’s practice are made by means of petty cash payments, cheque and electronic
funds transfer (known as EFT payments). It is crucial to maintain a difference between trust account
records and business account records when payments are made.
3.The Bank Statement

The bank sends bank statements to clients on a regular basis. This can be daily, weekly or monthly.
The bank statements are an account of the specific client’s transaction with the bank for a specific
period and therefore represent the attorney’s practice’s accounts in the books of the bank.58
58
Du Plooy Gilliland and Van Rooyen 3rd edition (2016) Accountancy for Attorneys, LexisNexis, Durban,
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81
5.The reconciling items

The purpose of a reconciliation is to agree the cash book balance of the attorney’s practice with the
balance of the bank statement at a specific point in time, since the bank statement balance usually
differs from the cash book balance.59
The cash book represents the books of record as kept at the attorney’s practice, while the bank
statement represents the transactions that took place at the bank, in respect of the attorney’s account.
The most common reconciling items are items recorded in the cash book, but not yet recorded on the
bank statement:
1. Outstanding deposit;
2. Outstanding cheques
Items appearing on the bank statement, but not yet recorded in the cash book include:
1. Bank charges
2. Unpaid cheques (Dishonoured – R/D cheques)
3. Debit order
4. Direct deposit via cash deposit or EFT transfer
5. Interest
6. Errors
Once the process of comparing the cash book with the bank statement has been completed, the next
step is to prepare the supplementary cash book and bank reconciliation statement. Items that have
been omitted from the cash book have to be entered in the supplementary cash book. Items that have
been omitted from the bank statement have to be recorded in the bank reconciliation statement.
59
Du Plooy Gilliland and Van Rooyen 3rd edition (2016) Accountancy for Attorneys, LexisNexis, Durban,
South Africa
82
Activity
You are the owner of Easy Attorneys. Your business cashbook balance at 31 August 2019 reflected a
debit balance of N$ 4 300. The business bank statement reflects on overdrawn balance of N$ 35 000
on the same date.
A comparison of the business cash book and business bank statement for July 2018 reveals the
following differences:
1. Cheque no 13 for N$ 1 500 in respect of stationery appears in the cash book but is omitted from
the bank statement.
2. A deposit of N$ 12 000 received by Easy Attorneys has not yet been deposited into the business
bank account.
3. A cheque for N$ 22 000, received from a debtor W. Wenen, is dishonoured by the bank as
appearing on the bank statement and not yet recorded in the cashbook.
4. The bank statement shows interest on overdraft of N$ 1 200 omitted from the cashbook.
5. The bank paid inadvertently a trust cheque for N$ 18 400 from the business bank account.
6. A monthly debit order of N$ 2 200 in respect of vehicle lease only appears on the bank statement.
7. An electronic funds transfer of N$ 15 000 in payment of the account of a client, S. S. Salzburg has
been omitted from the cash book.
Required:
1. Prepare the Supplementary Business Cash Book of Easy Attorneys for 31 August 2019.
2. Prepare the Business Bank Reconciliation Statement of Easy Attorneys for 31 August 2019.
Feedback
Supplementary Cash Book of C Chelsea for October 20.4
31 Balance 4 300 31 W. Wenen unpaid cheque 22 000
S Salzburg-direct Deposit 15 000 Interest on overdrawn balance 1200
Balance c/d 6 100 Vehicle lease 2 200
_______ _______
25 400
25 400 _______
________ Balance b/d 6 100
83
Bank Reconciliation Statement of Easy Attorneys at 31 August 2019
Unfavourable balance as per bank statement (35 000)
Less: Outstanding cheque (1 500)
Add: Outstanding deposit 12 000
Bank error 18 400
________
(6 100)
________
Activity
You are the owner of Cash Attorneys. Your business cashbook balance at 31 July 2018 reflected a
debit balance of N$ 28 000. The business bank statement balance on the same date was N$ 16 500.
A comparison of the business cash book and business bank statement for July 2018 reveals the
following differences:
1. A cheque issued on 30 June 2018 for N$ 7 500 has still not been presented for payment to the
bank.
2. A cheque issued on 31 May 2018 for N$ 40 000 has still not been presented for payment to the
bank.
3. A cheque received for N$ 5 000 has not yet been deposited in the bank.
4. A cash deposit received has not yet been deposited at the bank in the amount of N$ 39 000.
5. A cheque for N$ 22 000 received from a client and deposited is reflected as unpaid on the bank
statement and was never entered in the as such in the cash book.
6. Interest of N$ 6 000 on the favourable balance has not been entered in the cash book.
84
7. A cheque for N$ 8 000 drawn on the trust bank account has been paid by the bank from the
business bank account erroneously.
8. A direct deposit of N$ 9 000 by a client in the business bank account has not been recorded in the
cash book.
Required:
1. Prepare the Supplementary Business Cash Book of Cash Attorneys for July 2018.
2. Prepare the Business Bank Reconciliation Statement of Cash Attorneys for July 2018.
Feedback
Supplementary Cash Book of Cash Attorneys
Balance 28 000 R/D Cheque 22 000
Interest 6000 Balance 21 000
Direct Deposit 9000
_______ ________
43 000 43 000
________ _______
Balance 21 000
Bank Reconciliation Statement of Cash Attorneys
Balance as per Bank Statement 16 500
Less Outstanding Cheques (47 500)
30 May 7 500
31 May 40 000
_____________
85
Add Outstanding Deposits 44 000
5000
40 000
Add bank error 8000
Balance as per Bank Statement 21 000
Unit summary
The bank statement reflects all the actual flow of cash into and out of the
business bank account while the cash book reflects all the transactions that took
place at the attorneys practice. It is possible to have omissions from the cash
book because of transactions not recorded or omissions from the bank statement
for moneys received but not yet deposited into the bank account. Therefore, it is
important to reconcile the cash book with the bank statement on a continuous
basis.
References

86
Bibliography
Books
1. Du Plooy Gilliland and Van Rooyen 3rd edition (2016) Accountancy for Attorneys, LexisNexis,
2. Adams, G . de Lange, S and Storm A 2nd edition (2017) Accountancy for Attorneys, , LexisNexis
Statutes and Rules
1. Legal Practitioners Act 15 of 1995
2. Rules of the Law Society of Namibia
Case Law
1. Van der Merwe v Director Law Society Namibia and Others Case No SA 9/2012
2. Witvlei Meat (Pty) Ltd and others v Disciplinary Committee for Legal Practititioners and Others
Case No SA 9/2012
87
88

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STUDY GUIDE

Accountancy for Lawyers

Centre for Open, Distance and e-Learning

Edited and Published by Centre for Open, Distance and e-Learning

University of Namibia, Windhoek

Centre for Open, Distance and e-Learning

Mr. Marvin Ricardo Awarab Author

Dr Ndatega Victoria Asheela Content Editor

Mr.G Murangii Instructional Designer

Ms Karel Du Plessis Language Editor

Getting around this study guide 8

Accounting requirements: General .......................................................................................... 24

Ledger Accounts ...................................................................................................................... 60

Unit summary......................................................................................................................... 103

About this study guide

How this study guide is

▪ Why you should study this module:

▪ What you will already need to know.

▪ What you can expect from the course.

The overview also provides guidance on:

▪ Where to get help.

▪ Course assignments and assessments.

The course content

▪ An introduction to the unit content.

▪ Core content of the unit with a variety of learning activities.

▪ Assignments and/or assessments, as applicable.

▪ Answers to Assignment and/or assessment, as applicable

▪ Course content and structure.

▪ Course reading materials and resources.

▪ Course support (assigned tutors, technical help, etc.)

Welcome to Accountancy for

The Course inter alia covers:

2. The Accounting Cycle;

3. Accounting Equation (formula and application);

5. Business moneys/accounts versus trust moneys/accounts;

6. Preparation of elementary financial statements (including Trial Balance);

7. The double entry system and ledger accounts;

8. Books of first/prime entry (recording of basic business transactions);

9. Cash controls and business/trust bank reconciliation procedures (control accounts;

10. Trust investments;

11. Correspondent accounts;

12. Partnership and Companies accounts;

13. Accounting requirements and basic financial statements;

14. Interpretation and analysis of financial statements

Accountancy for Lawyers (CAC

As a law student it is imperative that you study this

Exit Learning Outcomes

1. Discuss the significance of financial information;

2. Explain the aim and nature of accounting;

5. Prepare bank reconciliation statements and

6. Prepare financial statements;

Essentially, you will be taking control of your learning

Your most significant considerations will be time and space i.e.

We recommend that you take time now—before starting your

Getting around this study guide

Activity Additional Answers to Assessment

Assignment Audio Case study Discussion

Exit Learning Feedback Group Activity Help

References Reflection Study skills Summary

Terminology Tip Video

The nature and function of

Upon completion of this unit you should be able to:

▪ discuss the development and the theory of accounting;