23 2023
MODULE NAME: MODULE CODE:
ACCOUNTING FOR ATTORNEYS AATT6312
ASSESSMENT TYPE: EXAMINATION (PAPER ONLY)
TOTAL MARK ALLOCATION: 100 MARKS
TOTAL HOURS: 3 HOURS (+15 minutes reading time)
INSTRUCTIONS:
1. Please adhere to all instructions in the assessment booklet.
2. Independent work is required.
3. Five minutes per hour of the assessment to a maximum of 15 minutes is dedicated to
reading time before the start of the assessment. You may make notes on your question
paper, but not in your answer sheet. Calculators may not be used during reading time.
4. You may not leave the assessment venue during reading time, or during the first hour or
during the last 15 minutes of the assessment.
5. Ensure that your name is on all pieces of paper or books that you will be submitting. Submit
all the pages of this assessment’s question paper as well as your answer script.
6. Answer all the questions on the answer sheets or in answer booklets provided. The phrase
‘END OF PAPER’ will appear after the final set question of this assessment.
7. Remember to work at a steady pace so that you are able to complete the assessment within
the allocated time. Use the mark allocation as a guideline as to how much time to spend on
each section.
Additional instructions:
1. This is a CLOSED BOOK assessment.
2. Calculators are allowed.
3. Answer all questions.
4. Show all calculations, where applicable (marks may be awarded for this).
© The Independent Institute of Education (Pty) Ltd 2023
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Question 1 (Marks: 10)
Fiona Harper, the accountant of Hadebe Attorneys, prepared the business bank reconciliation for
April 2023 as follows:
Business Bank Reconciliation Statement on 30 April 2023:
Credit balance according to the bank statement 24 560
Less: Outstanding payment no. 321 (2 300)
Add: Outstanding deposit no. 654 5 410
Outstanding deposit no. 987 3 060
Correction of error: overstated deposit (2 000)
Debit balance as per cashbook 28 730
Fiona had compared the above reconciliation with the cash journals and bank statement for
May 2023. She has provided you with the following information:
1) The business bank statement shows a credit balance of R99 250 on 31 May 2023.
2) The total of the bank column in the cashbook receipts journal amounted to R105 620 for May
2023, and the sum of the bank column in the cashbook payments journal amounted to
R70 480 for May 2023.
3) The outstanding payment no. 321 appeared in the bank statement for May 2023 at the
correct amount of R3 200. It is in respect of the monthly short-term insurance premium.
4) The outstanding deposit no. 654 of R5 410 appears on the May 2023 business bank
statement.
5) A payment of R12 500 received from a client has been incorrectly entered into the cashbook
as R1 250.
6) A deposit of R8 200 from Danny Harper, a client, for future services has been recorded on the
credit side of the bank statement.
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7) Anisa Essa, a debtor, settled her account of R14 050 in full via electronic funds transfer into
the business bank account of Hadebe Attorneys on 30 May 2023. The deposit was not
recorded in the cashbook receipts journal. The deposit appeared on the May 2023 business
bank statement.
8) Hadebe Attorneys made an EFT payment to the value of R6 000 on 31 May 2023 for office
rental to Riverfront Estates. The transaction was not reflected on the May 2023 business bank
statement.
9) Cash amounting to R16 400 was received during the last week of May 2023 and duly recorded
in the cashbook. However, these funds were only deposited at the bank on the last day of
May and hence does not appear in the bank statement for May 2023.
10) A payment in the amount of R3 300 made by the firm from the trust account appears on the
business bank statement.
11) The business bank statement for May 2023 shows the following items which do not appear
in the cash books of Hadebe Attorneys:
Bank charges of R360
Interest on credit balance of R250
Debit order in respect of internet fees for R850.
12) An EFT payment to a business creditor, Stanlab (Pty) Ltd, made on 25 May 2023, in the
amount of R18 500, only appears in the cash book. It is scheduled for payment on 05 June
2023.
Required:
Q.1.1 Prepare the business bank reconciliation statement on 31 May 2023. (10)
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Question 2 (Marks: 10)
Indicate whether the following statements are TRUE or FALSE by writing only TRUE or FALSE for
each question in your answer book:
Q.2.1 The money collected by an instructed attorney from a third party constitutes (1)
business money.
Q.2.2 The statement of profit and loss reports on the assets, liabilities and equity of the (1)
attorney’s practice.
Q.2.3 Karwa Attorneys is instructed by their client, A. Adams, to make a payment of (1)
R5 550 (including VAT at 15%) to Advocate Paul Williams for services rendered.
The payment should be made in the business cashbook payments journal.
Q.2.4 No amount exceeding the debit balance on the client’s account may be transferred (1)
from the client’s trust account.
Q.2.5 Interest earned on trust money may be used to cover bank charges on the trust (1)
bank account.
Q.2.6 An accountant’s report should be furnished to the Legal Practice Council within one (1)
year of the closing of the books.
Q.2.7 A cash withdrawal may be made from a trust client’s account in order to make bail (1)
payment on his / her behalf.
Q.2.8 A firm must account to its client in writing after performance of its mandate. (1)
Q.2.9 In terms of LPC rule 54.36, every legal practitioner is required to report dishonest (1)
or irregular conduct.
Q.2.10 Trust investments are trust liability accounts. (1)
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Question 3 (Marks: 45)
Danbury Attorneys sent the following account statement to their correspondent, Whistledown
Attorneys. It contains the details of two matters that Whistledown Attorneys had instructed
Danbury Attorneys to act upon on behalf of their client, Daphne Hastings, during the month of
September 2023.
Account Statement
Danbury Attorneys
P.O. Box 444
Veridale
Whistledown Attorneys
P.O. Box 222
Clyverdon
30 September 2023
Debit (R) Credit (R)
Daphne Hastings v Simon Hastings - Maintenance matter
Collection 30 000
Sheriff costs 360
Fee: summons 6 000
Fee: default judgement 2 800
Collection commission 1 500
Allowance to you 2 060
VAT @ 15% 1 545 309
Daphne Hastings - Registration of company
Fee for agreement 5 000
Registrar costs 2 000
Council fees 3 500
Allowance to you 1 000
VAT @ 15% 750 150
Electronic fund transfer herewith 10 064
33 519 33 519
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Additional information
1. Whistledown Attorneys paid Daphne Hastings the amount collected. The mandate from
their client, Daphne Hastings, is that they may set off the costs of the company registration
against money collected from the debtor, Simon Hastings.
2. All necessary transfers to the business bank accounts of each attorney were made in their
respective books of account.
Required:
Q.3.1 What percentage allowance has Danbury Attorneys allowed its correspondent (2)
attorney? Support your answer with a calculation.
Q.3.2 State whether the percentage allowance calculated in Q.3.1 above is acceptable (1)
and give a reason for your answer.
Q.3.3 Explain the first accounting step in the books of Whistledown Attorneys once the (2)
account statement is received from its correspondent.
Q.3.4 Record the information as contained in the correspondent account statement
from Danbury Attorneys in the following subsidiary journals of Whistledown
Attorneys for September 2023: (do not total the journals):
Q.3.4.1 Fees Journal (4)
Q.3.4.2 Trust Cash Payments Journal (10)
Q.3.4.3 Transfer Journal (2)
Q.3.5 Record all necessary entries in the following accounting records of Danbury
Attorneys:
Q.3.5.1 Trust General Ledger (6)
Q.3.5.2 Business General Ledger (18)
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Question 4 (Marks: 35)
Erin Carter and Associates is a firm of attorneys that specialises in property transactions. On
01 October 2023, the following balances appeared in the Trust and Business General Ledgers:
Debit Balance (R) Credit Balance (R)
Trust Bank 5 550 000
Mathebula Section 86(4) Trust Investment:
800 000
Crest Bank
Business Bank R36 000
The following transactions took place during October 2023:
02nd - Received a deposit of R300 000 from Ayesha Fredericks for future work to be performed.
03rd - Erin Carter (Partner) purchased a brand-new cell phone for her daughter who just turned
16. She used the firm’s debit card to make the payment of R20 000.
05th - The attorneys invested R1 500 000 of the trust funds that were not required immediately.
The funds are deposited in a special savings account at Greengrass Bank for a period of three
months, bearing interest at 15% per annum.
06th - The attorneys were appointed as the transferring attorney in terms of the sale of an
immovable property by client Kim Davies, to the purchaser Eric Ngubane. The agreement of
sale contains, inter alia, the following provisions:
The purchase price of R2 800 000 will be settled by means of a 15% deposit, amounting
to R420 000. The balance will be financed with a mortgage loan in the purchaser’s name
at Bluesky Bank.
All costs of transfer, including conveyancing costs and transfer duty is payable by Eric
Ngubane.
The estate agent commission as well as municipality clearance costs is for the account
of Kim Davies.
07th - Eric Ngubane pays the deposit of R420 000 by EFT. A guarantee is received from Bluesky
Bank for the balance of the purchase price.
10th - The purchaser paid the pro-forma statement of account in respect of the transfer costs as
follows:
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Transfer fees R45 000
Transfer duty R105 600
Total R150 600
12th - An invoice of R280 000 is received from the estate agent, Sunrise Properties Limited.
13th - Kim Davies transfers R13 500 via EFT to cover the costs of the electricity compliance and the
rates clearance certificates.
15th An amount of R11 000 is paid to the eThekwini Municipality on behalf of Kim Davies. The
Clearance Certificate is obtained.
- R2 500 is paid to Powerpro Electricians on instructions of the seller. The Electricity
Compliance Certificate is acquired soon after.
- Transfer duty is paid to SARS. The transfer is lodged at the Deeds Office.
30th - The investment on behalf of Zoe Mathebula at Crest Bank is redeemed, together with the
interest accrued since its inception of R32 000.
- The transfer is registered.
- All interest earned is duly paid to the beneficiaries.
- The estate agent fees are settled.
- Erin Carter and Associates account to both the seller and the purchaser.
Required:
Record ALL necessary transactions for the month of October 2023 in the following ledger accounts
of Erin Carter and Associates:
Q.4.1 Trust Bank Account (Balance the account). (20)
Q.4.2 Business Bank Account (3)
Q.4.3 Seller Trust Account (6)
Q.4.4 Mathebula Section 86(4) Trust Investment: Crest Bank (6)
Show all calculations and Ignore VAT for the purpose of this question.
END OF PAPER
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