General principles

Question 1

GP1

Answer 1

How to record TRUST MONEY received.
* money received from a client or on behalf of a client, pending the happening of a future event
* Sec 86(2) Trust Banking Account = Trust asset (DB+)
* Trust Ledger = TRUST LIABILITY (CR+)
(Never be in a DEBIT) Client is known as a Trust Creditor. We owe the client.

Question 2

GP2 - what are the two kinds of investments

Answer 2

INVEST TRUST MONEY
1. either Section 86(3) or
2. Section 86(4)

Question 3

GP2 - what is a s86(3) investment?

Answer 3

A practitioner is authorised to invest surplus trust money which will not immediately be used for any particular purpose, in a separate trust savings or other interest-bearing account at an approved bank.

This investment is made through the practitioner’s own initiative

Question 4

GP2 - what is a s86(4) investment?

Answer 4

These investments are made on mandate of the client (thus for his benefit) in a trust savings or other interest-bearing account with a bank approved by the LPFF. Written confirmation of the investment must be obtained from the client as soon as possible.

Question 5

GP2 - who gets the interest s86(3) and interms of which section?

Answer 5

The LPFF is the sole beneficiary of the interest earned on the investment in terms of Sec 86(5)(a).

Question 6

GP2 - who gets the interest s86(4) and interms of which section?

Answer 6

The interest earned on this investment will accrue to the client (95%) with the proviso that 5% of the interest earned vests in terms of section 86(5)(b) in the LPFF .

Question 7

GP2 -When should interest be paid s86(4)?

Answer 7

The 5% interest accrued during a calendar month shall be paid to the LPFF on or before the last day of the next calendar month (monthly).

Question 8

GP2 - When should interest be paid s86(3?)

Answer 8

Interest earned on this investment shall be paid to the LPFF within three months after the end of the practice’s financial year.

Question 9

GP2 - HOW TO INVEST TRUST MONEY IN TERMS OF SECTION 86(4)?

Answer 9

The day the investment is made, the trust money is withdrawn from the Sec 86(2) Trust Banking Account (money is going out) and invested in the Sec 86(4)-investment account.

(NB: You will never debit the Trust Ledger Account of the client)

client name/bank - can only put specific client money in here

Question 10

GP2 - HOW TO INVEST TRUST MONEY IN TERMS OF SECTION 86(3)?

Answer 10

The day the investment is made the trust money is withdrawn from the Sec 86(2) Trust Banking Account (money is going out) and invested in the Sec 86(3)-investment account.

LPFF/Bank name - can put multiple differnt clients monies in here as not instructed to do so

Question 11

GP2- S86(3)

What to do on the day of the withdrawl of the investment and the receiving of interest?

Answer 11

• the amount invested + the interest earned are recorded in the Trust Cashbook and posted to the credit side of the section 86(3) investment account
• Trust Journal should be used to transfer the interest earned to the LPFF Trust Ledger Account for interest in terms of sec 86(5)(a)
• To effect the interest payment to the LPFF, the Trust Cashbook will be credited and the LPFF Trust Ledger Account for interest in terms of sec 86(5)(a) debited.

Question 12

GP3

Answer 12

DISBURSEMENTS to be paid on behalf of a CLIENT to a service provider rendering a service to said client.
(Transfer Duty, Counsel, Estate Agent, Sheriff, Tracing Agent, Municipalities, Metros etc.)

Question 13

GP3 - rules

3

Answer 13

1. A deposit on property forms part of the purchase price and may
   not be used for the payment of a disbursement.
2. A client is always liable to pay the disbursement as the service is rendered to said client. Therefore, the client’s ledger account will always be debited.
3. A ledger account will never be opened for the service provider rendering the service to the client.

Question 14

GP3(a)

Answer 14

You received a payment from the client prior to the payment of the disbursement.

Payment effected in Trust

Question 15

GP3(b)

Answer 15

You did not receive a payment from the client prior to the payment of the disbursement.

Payment effected in Business b/c there are no funds in trust

Question 16

GP4

Answer 16

THE RECORDING OF A NON-CASH BUSINESS
TRANSACTION FOR SERVICES RENDERED BY A
SERVICE PROVIDER TO A CLIENT OF THE
PRACTICE = DISBURSEMENT (Business Liability)

If Counsel, Sheriff or Correspondent rendered a service to a client of the practice
and it is NOT REQUIRED TO PAY the Disbursement immediately, a BUSINESS
JOURNAL should be used to record the transaction in the business accounting
records as follows.

NOTE: A Ledger Account will be opened for the service provider.

Question 17

GP5

Answer 17

RECEIVING OF PAYMENT FROM A CLIENT WHO IS ALREADY A BUSINESS DEBTOR. (Mixed Money)

Should a disbursement already been paid out of business on behalf of a client or
fees were debited for services rendered to said client (client is a business debtor)
and the client pays you after the fact

Question 18

GP5(a)

Answer 18

• CASH – AMOUNT IS MORE THAN THE BUSINESS DEBT (This amount consists of Trust and Business money = mixed money)

*You receive the amount equal to what the client owes in the
Business banking account and the balance in the Trust banking
account.

Question 19

GP5(a)(i)

Answer 19

Receive amount equal to what the client owes in the Business Bank Account and the client settles the debt

Question 20

GP5(a)(ii)

Answer 20

Receive the balance of the payment in the Trust Banking Account.

Question 21

GP5(b)

Answer 21

EFT payment equal to business debt. Receive amount in Business banking account and the debt is settled.

Question 22

GP5(c)

Answer 22

• EFT is more than the debt amount. Meaning, the amount (consisting of Trust & Business money = mixed money) is more than the business debt.
• Receive the full amount in the Trust banking account because part of the
  amount is still trust money.

NOTE: You will settle the business debt later.