Trust Account Transactions in Property Conveyancing Assessment

Questions

1. You own the firm Ballack Attorneys (operating in Pretoria) and receive instruction from your correspondent, Adams Attorneys (operating from Rustenburg) to attend to a collection matter. You are instructed to recover debt of R900 000 from Mr Botha, on behalf of your correspondent's client, Ms Chauke.

You draft the following statement to Adams Attorneys on 20 November 2024.

According to your agreement with Adams Attorneys, they are granted a 3o% correspondent allowance on all income earned by Ballack Attorneys as a direct result of services performed with regard to the above matters. Ballack Attorneys and Adams Attorneys are both registered VAT vendors. On 30 November 2024, you pay the VAT liability for November 2024 over to the South African Revenue Service (SARS).

You are required to:

Prepare all the relevant accounting entries related to the statement above in the following records of Bailack Attorneys for November 2024:

• Books of primary entry (Business Cash Book & Trust Cash Book only - it is not
• necessary to show other journal entries)
• General Ledger accounts
• Business Debtor (Client) Ledger
• Trust Creditor Ledger

2. Your firm, Chiloane Attorneys, is appointed as the conveyancer n an agreement of sale and purchase of an immovable property sold by your client, Mr Du Plessis, to the purchaser' Mrs Kopano. You drafted the sales agreement on instructions of your clien,t Mr Du Plessis.The agreement makes provision. for the purchase price of R2 500 000 to be paid bv the purchaser buy way of a deposit of Rs R250 000 the balance to be paid on registration of transfer.

The agreement provides for the costs related to the transfer to be paid as follows:

• The purchaser is responsible to pay
• the transfer duty – of R79 275
• occupational rent of R8500 per month; and
• your fees with regards to setting up the sale agreement and attending to the transfer of the property.

The seller is responsible to pay the estate agent's commission (included in the total purchase price) and all remaining costs related to the finalisation of the transfer.

• On 2 January 2025, Mrs Kopano pays the deposit of R250 000 to you and requests you to invest it on her behalf. You execute this instruction and invest the money at Innescor Bank.
• On the same date, Mrs Kopano also pays you an additional R130 000 to cover costs related to the transfer.
• On 3 January 2025, the estate agent submits a pro-forma invoice of R73 500 to you.
• On 4 January 2025 Mr Du Plessis transfers R18 000 to cover costs related to the transfer by means of an electronic funds transfer (EFT) transaction.
• On 7 January 2025 you pay De Wit Electricians R3 000 out of the trust bank account for the issuance of the electricity compliance certificate required for the transfer.
• On 25 January 2025, you receive a guarantee from Mortgage Bank for R1 127 500. A copy of a guarantee for R1 122 500 payable to Mr Du Plessis's existing bond holders, First Bank, is also sent to you by Mortgage Bank.
• On 28 January 2025 you pay City of Tshwane an amount of R14 000 for outstanding rates and taxes on the property and the South African Revenue Service (SARS) the transfer duty.

The transfer is registered on 30 January 2025. Innescor Bank pays a total interest of R3 000 on the investment of the deposit and immediately transferred an amount of R150 to the LPFF. You receive R1 127 500 from Mortgage Bank who also pay First Bank R1 122 500. Mr Du Plessis should receive R8 500 for occupational rent. Your fees and costs amount to R38 912.

After performing the necessary transfers and making the required accounting entries, you close off all the relevant accounts.

Note: Ignore all VAT implications for purposes of this question.

You are required to:

Prepare all the relevant accounting entries related to the statement above in the following records of Chiloane Attorneys for January 2025:

• Books of primary entry (Business Cash Book & Trust Cash Book only- it is not necessary to show other journal entries)
• General Ledger (it is not necessary to prepare control accounts for business debtors and trust creditors but)
• Business Debtor (Client) Ledger
• Trust Creditor Ledger (including relevant investment account(s) if applicable).

Assessment Summary

This assessment focused on legal accounting transactions within attorney firms in South Africa. The tasks were divided into two scenarios:

1. Debt Collection Case – Ballack Attorneys

• Record all accounting entries for services rendered in recovering a R900,000 debt.
• Capture entries in:
  • Business Cash Book & Trust Cash Book
  • General Ledger
  • Business Debtor (Client) Ledger
  • Trust Creditor Ledger
• Reflect VAT liability payments to SARS.
• Apply correspondent allowance (30%) payable to Adams Attorneys.

2. Property Conveyancing Case – Chiloane Attorneys

• Record all accounting transactions for the sale of immovable property valued at R2,500,000.
• Capture deposit, transfer costs, occupational rent, bank guarantees, transfer duty, agent commission, and investment interest.
• Record transactions in:
  • Business Cash Book & Trust Cash Book
  • General Ledger
  • Business Debtor (Client) Ledger
  • Trust Creditor Ledger (with investment accounts).

• Perform all necessary transfers, close accounts, and ignore VAT implications.

Mentor’s Step-by-Step Approach to Guiding the Student

The Academic Mentor broke the assessment into logical, sequential steps, ensuring the student understood both the legal context and accounting requirements.

Step 1 – Understanding the Case Background

• Explained the difference between business cash transactions and trust transactions in attorney firms.
• Highlighted the importance of compliance with South African legal accounting rules (trust funds, client money, VAT, investment accounts).

Step 2 – Identifying Key Transactions

• For Ballack Attorneys: Mentor guided the student to identify income, correspondent allowance, VAT obligations, and SARS payment.
• For Chiloane Attorneys: Mentor helped list all inflows/outflows such as deposits, EFT payments, occupational rent, agent’s commission, bank guarantees, and transfer duties.

Step 3 – Recording in Books of Primary Entry

• Explained how to use Business Cash Book for firm income/expenses and Trust Cash Book for client funds.
• Ensured correct classification of each transaction before posting to ledgers.

Step 4 – Posting to General Ledger

• Mentor demonstrated how to open accounts (e.g., Trust Bank, Trust Investment, Transfer Duty, Estate Agent’s Commission, Occupational Rent, Fees Earned).
• Guided the student in balancing accounts and ensuring debit/credit accuracy.

Step 5 – Updating Client & Creditor Ledgers

• Business Debtor Ledger: Student was shown how to reflect client balances and services rendered.
• Trust Creditor Ledger: Mentor explained recording client-specific funds, payments made on their behalf, and transfers between accounts.

Step 6 – Reconciling and Closing Accounts

• Mentor assisted in reconciling cash books with ledger balances.
• Explained how to close accounts at the end of the reporting period after all disbursements and receipts were processed.

Outcome & Learning Achievements

By following this structured guidance, the student successfully:

• Completed all required accounting entries for both Ballack Attorneys and Chiloane Attorneys.
• Correctly differentiated between trust and business transactions.
• Demonstrated the ability to record, post, reconcile, and close accounts in compliance with legal accounting practices.
• Applied theoretical knowledge of business ethics, legal trust accounting, and financial compliance to practical scenarios.

Learning Objectives Covered:

• ULO 1: Awareness of ethical/legal responsibilities in managing client funds.

• ULO 2: Application of accounting principles in a legal context.

• ULO 3: Understanding the role of conveyancing and debt collection in attorney practice.

• GLO 1: Discipline-specific knowledge of legal accounting.

• GLO 2 & 3: Written/analytical and research skills through application of financial reporting in legal practice.

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