Steps that should be followed to finalise a matter in the accounting records

Question 1

Step 1

Answer 1

WITHDRAWAL OF SEC 86(4) – INVESTMENT AND RECEIVING THE INTEREST
EARNED THEREON. (This step consists of Trust Cashbook and a Trust
Journal entries)

Question 2

Step 1(a)

Answer 2

Receiving the capital amount plus interest in the Sec 86(2) Trust
Banking Account.
(This step the Trust Cashbook will be used)

• The trust cashbook is debited and the section 86(4) investment account credited with
  the capital amount plus the interest earned thereon.

Question 3

Step 1(b)

Answer 3

Movement of the interest from the Sec 86(4) investment account
to the beneficiaries.
(A Trust Journal is used to effect the movement)

Question 4

Step 2

Answer 4

RECEIVE THE BANK GUARANTEE AMOUNT (BOND) (The Trust Cashbook is
used)

The bank that approved the Purchasers’ bond will pay the amount via an EFT to the
Conveyancer.

Question 5

Step 3

Answer 5

DEBIT / CHARGE (INVOICE) CLIENT WITH FEES (YOUR INCOME) = make client
a business debtor (A Fees Journal should be used)

To invoice a client with fees, is always a BUSINESS transaction. This is the
amount you debit / charge / invoice the client for professional services rendered.
Remember, a client always owes you money on business – you make the client a
BUSINESS DEBTOR

Question 6

Step 4

Answer 6

MOVEMENT OF AN AMOUNT FROM ONE CLIENT’S TRUST LEDGER
ACCOUNT TO ANOTHER CLIENT’S TRUST LEDGER ACCOUNT. (A Trust Journal should be used.)

When dealing with a conveyancing matter this step should be done to move the full
purchase price from the PURCHASER’S Trust Ledger Account (one client) to the
SELLER’S Trust Ledger Account (another client).

A Trust Journal should be used as Book of Prime Entry to move the purchase price
from the Purchaser Trust Ledger Account (the Dr Account) to the Seller Trust Ledger
Account (the Cr Account).

Question 7

Step 5

Answer 7

PAY OUTSTANDING DISBURSEMENTS TO SERVICE PROVIDERS OF A
CLIENT: i.e the Estate Agent
(Apply general principle 3)

Question 8

Step 6

Answer 8

THE PURPOSE OF THIS STEP IS TO SETTLE A CLIENT’S BUSINESS DEBT.
TO SETTLE THE DEBT, TRUST MONEY SHOULD BE MOVED FROM THE
CLIENT’S TRUST LEDGER ACCOUNT TO HIS / HER BUSINESS LEDGER
ACCOUNT.

Question 9

Step 6(a)

Answer 9

AN INTER-LEDGER MOVEMENT
(From Trust Ledger to Business Debtor Ledger and a Transfer Journal will be used.)

MOVEMENT OF AN AMOUNT FROM A CLIENT’S TRUST LEDGER ACCOUNT (CREDITOR) TO THAT SAME CLIENT’S BUSINESS LEDGER ACCOUNT
(DEBTOR) TO SETTLE THE CLIENT’S BUSINESS DEBT.

Should trust funds be available an amount thereof, should be moved from a client’s TRUST
LEDGER Account (the Dr Account) to that same client’s BUSINESS LEDGER
Account (the Cr Account) to settle the business debt.

Balance the client’s Business Ledger Account (Debtor)

Balance the Client’s Trust Ledger Account (Creditor)

Once it is determined the client has trust funds available to settle his business debt a
TRANSFER JOURNAL should be used as a Book of Prime Entry to move the debt
amount from (Dr) the Trust Ledger Account to (Cr) the Business Ledger Account of
the client.

The debt amount is to be moved from (Dr) the client’s Trust Ledger Account to (Cr)
his Business Ledger Account, to settle the debt.

Question 10

Step 6(b)

Answer 10

INTER-BANKING TRANSFER
The purpose of this step is to effect an EFT payment for the total amount owed by all
debtors under step 6(a) from the Sec 86(2) Trust Banking Account to the
Business Banking Account.
(The Trust Cashbook and Business Cashbook is used)

Question 11

Step 7

Answer 11

If step 6 was applicable and the client settled his business debt, there might be a
credit available in his trust ledger account. This trust credit is the amount the practice
owes the client (Trust Liability) and ACCOUNT TO THE CLIENT.

If step 6 was not applicable, the amount owed to the client should be calculated by
balancing the client’s Trust Ledger Account.