FAC 1503 ASSESSMENT 4

An attorney’s trust account is essentially a business bank account, established by the attorneys’ firm to hold client
funds.

Select one:
True

False
Feedback
Refer to learning unit 6.6
The correct answer is 'True'.
Question 3
Correct
Mark 3.00 out of 3.00
The senior partner in the legal firm, SA Attorneys, instructed A South from West Attorneys to act on his behalf in the matter
between C Natal and E North. C Natal instituted a claim against E North for damages incurred in an accident due to negligent
driving. However, before the case served before the court, the parties settled on an amount of R231 000 payable by E North to
C Natal. E North immediately paid the amount into the trust bank account of West Attorneys.
SA Attorneys received the following statement from West Attorneys at 31 May 2022:

Account statement
WEST ATTORNEYS
SA ATTORNEYS
PO Box 4000 PO Box 253
DURBAN MBOPANE
31 May 2022
R R
Collection of settlement amount – C Natal vs E North 231 000
Fees for receiving instruction 12 900
Correspondence 920
Expert witness fees – Dr East 3 500
Medical records obtained 790
Subtotal 18 110
Collection fees 1 000
Your share of fees (allowance) 4 940
Electronic fund transfer to yourself 216 830
235 940 235 940

Which one of the following represents the correct recording of the above information in the client's ledger of SA
Attorneys for West Attorneys?

Select one:

a.
West Attorneys
2022 R 2022 R
31/05 Fees FJ1 4 940 31/05 West Attorneys (trust
creditor) (transfer) TJ1 4 940
4 940 4 940

b.
West Attorneys (C Natal)
2022 R 2022 R
31/05 Trust bank TCRJ 216 830 31/05 C Natal (trust creditor) GJ1 231 000
C Natal (trust creditor) GJ1 19 110 West Attorneys (client) TJ1 4 940
(transfer)
235 940 235 940

c.
West Attorneys (C Natal)
2022 R 2022 R
31/05 C Natal (trust creditor) GJ1 231 000 31/05 Trust bank TCRJ 216 830

West Attorneys (client) C Natal (trust creditor) GJ1 19 110

(transfer) TJ1 4 940
235 940 235 940

d.
West Attorneys
2022 R 2022 R
31/05 West Attorneys (trust creditor) FJ1 4 940 31/05 Fees TJ1 4 940
(transfer)
4 940 4 940
Feedback
Refer to learning unit 8.9
The correct answer is:
West Attorneys
2022 R 2022 R
31/05 Fees FJ1 4 940 31/05 West Attorneys (trust creditor)
(transfer) TJ1 4
4 940 4
Question 4
Correct
Mark 1.00 out of 1.00
The LPA, as well as the Legal Practice Council Rules require a monthly audit report to be rendered by the auditor.

Select one:
True

False
Feedback
Refer to learning unit 7.5.2
The correct answer is 'False'.
Question 5
Correct
Mark 1.00 out of 1.00
The correspondent allowance may be more than 1/3 of the fees charged, but not less.

Select one:
True
 False
Feedback
Refer to learning unit 8.3
The correct answer is 'False'.
Question 6
Incorrect
Mark 0.00 out of 1.00
The total of the trust creditors’ account must be equal to or greater than the total credits balance of the individual
trust creditors.

Select one:
True

False
Feedback
Refer to learning unit 6.2
The correct answer is 'True'.
Question 7
Correct
Mark 1.00 out of 1.00
Every entry made by the instructed attorney on the account statement is the result of such attorney acting on the
instructions of the instructing attorneys.

Select one:
True

False
Feedback
Refer to learning unit 8, example 8.4
The correct answer is 'True'.
Question 8
Incorrect
Mark 0.00 out of 1.00
Which one of the following statements is correct in terms of the auditor’s responsibilities per the LPA and the LPC
rules when appointed by a law firm?

Select one:

a.
The audit report must be submitted to the Law Society by the law practice.

b.
The auditor should report the result of queries by the auditor on any material issue regarding the accounting
records of the attorney’s practice that was dealt with to her/his satisfaction.

c.
The auditor should only report a trust deficit if it is not dealt with within 12 months.

d.
An annual audit report should be rendered.
Feedback
Refer to learning unit 7.5.2
The correct answer is: An annual audit report should be rendered.
Question 9
Incorrect
Mark 0.00 out of 1.00
Which one of the following statements is correct?

Select one:

a.
Two sets of accounting records must be kept by the legal practice to allow for a smooth process of transfer of funds
between the trust bank account and the business bank account.

b.
The legal practice must make transfers from its trust banking account to its business banking account at least
biannually.

c.
The legal practice may not transfer funds from the trust bank account to the business bank account to cover interim
fees on prior agreement between the client and the attorney.

d.
Trust money may be used to pay for the legal practice’s expenses when the business bank account does not have
sufficient funds.
Feedback
Refer to learning unit 6.1
The correct answer is: The legal practice may not transfer funds from the trust bank account to the business bank
account to cover interim fees on prior agreement between the client and the attorney.
Question 10
Correct
Mark 1.00 out of 1.00
The two trust investment accounts in terms of sections 86(3) and 86(4) of the LPA are general ledger accounts.

Select one:
True

False
Feedback
Refer to learning unit 7.1
The correct answer is 'False'.
Question 11
Correct
Mark 1.00 out of 1.00
If the law firm utilises electronic banking (EFT’s) in respect of payments from the trust account to the business
account the law firm shall keep a proper audit trail, which shall include verification of the payee’s banking account
details.

Select one:
True

False
Feedback
Refer to learning unit 6.7
The correct answer is 'True'.
Question 12
Correct
Mark 1.00 out of 1.00
South Attorneys instructed SA Attorneys to collect outstanding rental income on behalf of a client, Mrs S Africa.
Which one of the following statements regarding the above is correct?

Select one:

a.
Mrs Africa is a client of South Attorneys and South Attorneys is a client of SA Attorneys after the instruction.

b.
Mrs S Africa is a client of SA Attorneys after the instruction to collect the rental income.

c.
Mrs S Africa is a client of both South Attorneys and SA Attorneys after the instruction to collect the rental income.

d.
SA Attorneys is a client of South Attorneys and Mrs S Africa is a client of SA Attorneys after the instruction to collect
the rental income.
Feedback
Refer to learning unit 8.4
The correct answer is: Mrs Africa is a client of South Attorneys and South Attorneys is a client of SA Attorneys after
the instruction.
Question 13
Correct
Mark 1.00 out of 1.00
Only 95% of the interest earned on Section 86(4) trust investments vests with the Legal Practitioners Fidelity Fund
and therefore is not the property of the legal practitioner nor the trust creditors.

Select one:
True

False
Feedback
Refer to learning unit 7.3
The correct answer is 'False'.
Question 14
Correct
Mark 3.00 out of 3.00

The following balances were obtained from the accounting records of SA Attorneys on 1 February 2022:

Trust creditors Clients account

Client
account
R
R
A South 2 000 Cr 4 000 Dr
S Africa 10 000 Cr 3 000 Dr

12 000 Cr 7 000 Dr
 The following transactions took place and were accounted for, after all services to the client were completed, in the accounting records on
28 February 2022:

Fees charged at the end of

the day
Client R
A South 1 500
S Africa 4 700

6 200

What is the total amount owing in the clients control account of A South to SA Attorneys after all transfers from the
trust creditor account to the clients account of A South have been made on 28 February 2022?

Select one:

a.
R3 500

b.
R2 000

c.
R5 500

d.
R1 500
Feedback
Refer to learning unit 6.2 to 6.5
The correct answer is: R3 500
Question 15
Incorrect
Mark 0.00 out of 1.00
The trust bank account should always reflect a debit balance.

Select one:
True

False
Feedback
Refer to learning unit 6.2
The correct answer is 'True'.
Question 16
Correct
Mark 1.00 out of 1.00
An example of where instructions can be given to the instructed attorney where no trust monies are involved is the
collection of child maintenance.

Select one:
True
 False
Feedback
Refer to learning unit 8.2
The correct answer is 'False'.
Question 17
Correct
Mark 1.00 out of 1.00
Mr Africa from South Attorneys received a mandate from Mrs C West (client) to act on her behalf to collect child
maintenance money from her ex-husband Mr E West in Johannesburg. South Attorneys only has an office in
Durban and therefore instructed JHB Attorneys in Johannesburg to act on their behalf. In the above scenario Mr
Africa from South Attorneys is the instructing attorney.

Select one:
True

False
Feedback
Refer to learning unit 8.4
The correct answer is 'True'.
Question 18
Correct
Mark 1.00 out of 1.00
The trust creditors list is a list of the individual trust creditors and the amount owed to them obtained from the
individual balances in the general ledger accounts for each trust creditor.

Select one:
True

False
Feedback
Refer to learning unit 7.1
The correct answer is 'False'.
Question 19
Incorrect
Mark 0.00 out of 1.00
If there are trust funds available for a transfer to the business account to settle the fees levied, an entry is made in
the transfer journal. The trust creditor account is debited and the client account is credited.

Select one:
True

False
Feedback
Refer to learning unit 6.2
The correct answer is 'True'.
Question 20
Correct
Mark 1.00 out of 1.00
According to section 86(2) of the LPA, every trust account practice must keep a trust account at a bank with which
the Legal Practitioners Fidelity Fund has made an arrangement as provided for in section 63(1)(g) and must deposit
therein, as soon as possible after receipt thereof, money held by such practice on behalf of any person.

Select one:
 True

False
Feedback
Refer to learning unit 7.1
The correct answer is 'True'.
Question 21
Correct
Mark 1.00 out of 1.00
Which of the following statements is incorrect?

Select one:

a.
The Attorneys Fidelity Fund (AFF) became the Legal Practitioners Fidelity Fund (LPFF).

b.
In the case of a section 86(2) investment of the Legal Practice Act, 28 of 2014, 100% of trust interest earned, less
approved recoverable bank charges, will be paid monthly to the LPFF.

c.
In the case of a section 86(4) of the Legal Practice Act, 28 of 2014, 5% of the trust interest earned will be paid
monthly to the LPFF.

d.
In the case of a section 86(3) of the Legal Practice Act, 28 of 2014, 100% of trust interest earned will be paid on a
monthly basis to the LPFF.
Feedback
Refer to learning unit 7.1. 7.2 and 7.3
The correct answer is: In the case of a section 86(3) of the Legal Practice Act, 28 of 2014, 100% of trust interest
earned will be paid on a monthly basis to the LPFF.
Question 22
Correct
Mark 3.00 out of 3.00
SA Attorneys invested trust funds on instruction from their client, A South in Africa Bank (An approved bank).
Interest of R3 000 was earned on the investment. What will be the journal entry in the accounting records of SA
Attorneys to account for the interest received from Africa Bank on the section 86(4) investment of A South on 31
May 2022?

Select one:

a.
Trust journal
Debit Credit
Date Accounts R R
May 31 A South - Section 86(4) Investment 3 000
Trust creditor: Legal Practitioners Fidelity Fund 3 000

b.
Trust journal
Debit Credit
Date Accounts R R
May 31 A South - Section 86(4) Investment 3 000
Trust creditor: A South 2 850
Trust creditor: Legal Practitioners Fidelity Fund 150

c.
Trust journal
Debit Credit
Date Accounts R R
May 31 A South - Section 86(4) Investment 3 000
Trust creditor: A South 3 000

d.
Trust journal
Debit Credit
Date Accounts R R
May 31 A South - Section 86(4) Investment 3 000
Interest received 3 000
Feedback
Refer to learning unit 7.3
The correct answer is: Trust journal
Debit Credit
Date Accounts R R
May 31 A South - Section 86(4) Investment 3 000
Trust creditor: A South 2 850
Trust creditor: Legal Practitioners Fidelity Fund 150
Question 23
Correct
Mark 1.00 out of 1.00
Which one of the following journals should be used to make all transfers to the clients' ledger and the trust
creditors ledger?

Select one:

a.
The general journal

b.
Transfer journal

c.
The business cash receipts journal

d.
Trust cash payments journal
Feedback
Refer to learning unit 6.7
The correct answer is: Transfer journal
Question 24
Correct
Mark 1.00 out of 1.00
South Attorneys instructed SA Attorneys to collect child maintenance money on behalf of a client, Mrs E North. SA
Attorneys incurred the following expenses in collection the money from E North, namely tracing cost of R300 and
sheriff cost of R600. On 11 April 2022 the amount collected were deposited into the Trust bank account of South
Attorneys. The total amount deposited was R7 500.
Which one of the following statements regarding the distribution of fees is correct?

Select one:

a.
In terms of the LPA, the instructing attorney is entitled to 10% of all fees (professional and collection) levied by the
instructed attorney, including expenses incurred on behalf of third parties.

b.
The instructing attorney is entitled to one-third of any advocate fees, sheriff cost or tracing costs since these
expenses are expenses incurred on behalf of third parties and are fees charged by the instructed attorney.

c.
In terms of the LPA, the instructing attorney is entitled to one-third of all fees (professional and collection) levied by
the instructed attorney.

d.
The instructed attorney is entitled to 10% of any advocate fees, sheriff cost or tracing costs since these expenses are
expenses incurred on behalf of third parties and are fees charged by the instructing attorney.
Feedback
Your answer is correct.
The correct answer is:
In terms of the LPA, the instructing attorney is entitled to one-third of all fees (professional and collection) levied by
the instructed attorney.
Question 25
Correct
Mark 1.00 out of 1.00
The correspondent allowance is not calculated on any expenses that are paid directly to third parties, such as
advocate costs and sheriff costs.

Select one:
True

False
Feedback
Refer to learning unit 8.3
The correct answer is 'True'.