Learning unit 7

FINANCIAL ACCOUNTING PRINCIPLES FOR LAW PRACTITIONERS

LEARNING UNIT

7 TRUST INVESTMENTS

Contents
7.1 Introduction .................................................................................................................................. 3
7.2 Section 86(3) of the Legal Practice Act 28 of 2014 ..................................................................... 6
7.3 Section 86(4) of the Legal Practice Act 28 of 2014 ................................................................... 12
7.4 Schematic summary of the process of investing trust money ................................................... 13
7.5 The LPC Rules for the Attorneys’ Profession in respect of trust monies ................................... 21
7.5.1 Introduction ................................................................................................................... 21
7.5.2 Appointment of an auditor/public accountant ............................................................... 22
7.5.3 Accounting to clients..................................................................................................... 22
7.5.4 Consequences of non-compliance with prescriptions .................................................. 23
7.6 Self-assessment exercises ........................................................................................................ 36

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 Learning unit 7

The following concept cards are available for this learning unit:

CONCEPT
CARDS o LPC Rules
o The process of investing trust money

After studying this learning unit, you should be able to: 1

• demonstrate knowledge of the Legal Practice Act 28 of 2014 (LPA) and the Legal
Practice Council (LPC) Rules for the Attorneys’ Profession (and rulings where
applicable)
• know the important subsections of section 86 of the LPA (subsections 86(2), 86(3), 86(4)
and 86(5)(a))
• apply section 86 of the LPA to a given set of facts
• distinguish between a section 86(3) and 86(4) trust investment
• explain how the interest received is dealt with in each case
• identify the beneficiaries of investment interest
• record trust investment transactions in the accounting records

• Section 86(3) trust investment

• Section 86(4) trust investment
• Trust creditor
• Trust creditors ledger
• Trust creditors control account
• Trust investments
• Trust money
• Legal Practitioners Fidelity Fund (LPFF)

LPA Legal Practice Act, 28 of 2014

LPFF Legal Practitioners Fidelity Fund
LPC Rules Legal Practice Council Rules

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7.1 Introduction

In an attorneys practice, clients in most instances are required to deposit money into the trust
bank account of the attorney for safekeeping, until the matter or court case has been
concluded or has lapsed. Examples of these are:
• deposits in property transactions
• provisions for advocates’ fees
• other expenses in court cases, and
• the provision for attorneys’ fees especially where the amount of fees are material.

QUICK
NOTE • Section 86(1) ― Every legal practitioner referred to in section 84(1) must
operate a trust account.
• Section 86(2) ― Every trust account practice must keep a trust account
at a bank with which the 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.

Section 88(1) of the Legal Practice Act, 28 of 2014 states that trust money does not form part
of the assets of the law practitioners practice. Thus, the creditors of the legal practice cannot
claim against this money.

This means that if there are trust monies in the trust bank account which are not immediately
needed for specific purposes and are not earning any interest may be invested. In terms of
section 86 of the LPA, attorneys are authorised to invest the trust monies in trust investment
accounts. The trust investments remain as part of the overall trust monies that must, together
with the trust bank account, be equal to or more than the total of the trust creditors accounts.

Trust investments Trust bank account ≥ Trust creditors control

The trust creditors ledger keep records of transactions with each individual trust creditor.

The “trust creditors control account” is one account in the general ledger which represents
the total amount owed to all the individual trust creditors in the trust creditors ledger. The
balance of the trust creditors control account must equal the total of the trust creditors list.
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 trust creditors ledger (subsidiary ledger) accounts
for each trust creditor.

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Explanations of the terms discussed above:

In the trust creditors ledger (a subsidiary ledger) –

Dr A South TCL1 Cr
20.6 R 20.6 R
30/06 Trust bank TCPJ6 XXX 01/06 Opening balance b/d XXX
30/06 Closing balance c/d AAA 30/06 Trust bank TCRJ6 XXX
XXX XXX
01/06 Opening balance b/d AAA

Dr S Africa TCL2 Cr
20.6 R 20.6 R
30/06 Trust bank TCPJ6 XXX 30/06 Trust bank TCRJ6 XXX
30/06 Closing balance c/d AAA
XXX XXX
01/06 Opening balance b/d AAA

Opening balance
From the cash payments From the cash receipts which was the closing
journal – payments for month journal – receipts for the balance for the
month previous month/year
In the general ledger –
Dr Trust creditors control GL4 Cr
20.6 R 20.6 R
30/06 Trust bank account TCPJ6 XXX 01/06 Opening balance b/d XXX
30/06 Closing balance c/d AAA 30/06 Trust bank account TCRJ6 XXX
XXX XXX
01/06 Opening balance b/d AAA

This control account represents the subsidiary ledger - Trust creditors ledger
in the general ledger. The total of the trust creditors list must EQUAL the
balance at the end of the month of the trust creditors control account

The trust creditors list –

Account
Name of client reference R
Creditor 1 TCL1 XXX
Creditor 2 TCL2 XXX
Creditor 3 TCL3 XXX
Total XXX

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Law practices investing in terms of the LPC Rules should pay attention to the requirements of
the LPC Rules as follows:

A firm shall for the purpose of this rule be deemed to be carrying on the
business of an investment practice if it invests funds on behalf of a client
Rule 55.1
or clients and it controls or manages such investments, whether directly or
indirectly.

A client shall for the purpose of this investment practice rule include any
person on whose behalf a firm invest funds or manages or controls
Rule 55.2
investments, whether or not such person is otherwise a client of the firm
concerned.

A legal practitioner carrying on an investment practice shall obtain an

investment mandate from each client before or as soon as possible after
Rule 55.4 investing funds on behalf of the client. The investment mandate must
contain a statement that the client acknowledges that moneys so invested
DO NOT enjoy the protection of the LPFF.

The trust banking of legal practitioners is regulated by Sections 84 and 86 of the Legal Practice
Act 28 of 2014.

Section 84(1) Every attorney or any advocate referred to in section 34(2)(b) of the LPA,
who practises or is deemed to practise –
► for his or her own account either alone or in partnership; or
► as a director of a practice which is a juristic entity, must be in possession of a Legal
Practitioners Fidelity Fund certificate.

Section 84(3) The provisions of subsections (1) and (2) above apply to a deposit taken
on account of fees or disbursements in respect of legal services to be rendered.
(e.g. Trust money)

Section 84(2) No legal practitioner referred to in subsection (1) or person employed or

supervised by that legal practitioner may receive or hold funds or property belonging to
any person unless the legal practitioner concerned is in possession of a Legal
Practitioners Fidelity Fund (LPFF) certificate.

Section 86(1) Every legal practitioner referred to in section 84(1) must operate a trust
account. [A trust account is a separate bank account]

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Section 86(2) Every trust account practice must keep a trust account at a bank with
which the LPFF 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. This is interest earned on the practice trust account

(a) Interest accrued must, in the case of money deposited in terms of this subsection,
be paid over to the LPFF and vests in the LPFF,
NB! (b) 100% of trust interest earned, will be paid monthly to the LPFF as provided for by
Rule 54.14.16.1 made under the authority of Section 95(1) of the Legal Practice Act
28 of 2014.

The legal practitioner can claim approved recoverable bank charges and audit fees on
the trust accounts back from the LBF Fund, subject to certain formulas and
requirements.

There are two types of trust investments, namely:

• Investments in terms of section 86(3) of the LPA; and
• Investments in terms of section 86(4) of the LPA.

QUICK
NOTE
 There is no limit to the number of trust investment accounts a law
practice may open.
 The two trust investment accounts in terms of sections 86(3) and 86(4)
of the LPA are trust creditors accounts and are not included in the
general ledger but in the trust creditors ledger.
 The trust creditors control account forms part of the general ledger
 These two accounts are the only trust creditors accounts that may have
debit balances.

It is this point that differentiates

7.2 Section 86(3) of the Legal Practice Act 28 of 2014 the type of investments

In terms of section 86(3) of the LPA, a legal practitioner may transfer trust money which is
not immediately needed to a trust savings or other interest-bearing investment account at a
South African banking institution. It may, however, not be invested on the security exchange
or in unit trusts. This money is taken from the pool of funds and not from specific trust creditors.
The decision to invest the surplus money is made by the legal practitioner and the following
applies.

(a) The investments should be made with banks with which the LPFF has entered into an
arrangement.
(b) These investments remain part of the entrusted monies and are recorded as such in the
trust accounting records of the legal practice. These investments enjoy protection from
the LPFF.
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(c) The LPA requires that the bank statements be endorsed with a reference to section 86(3)
of the LPA. The legislation also stipulates that the name of the trust investment account
in the trust creditors ledger include a reference to the specific section of the legislation
applicable, for example. S Africa sec 86(3) trust investment: ABC Bank.
(d) Interest accrued must, in the case of money deposited in terms of this subsection, be paid
over to the LPFF and vests in the LPFF. NB!

(e) 100% of trust interest earned will be paid on an annual basis to the LPFF as provided
for by Rule 54.14.16.3 made under the authority of Section 95(1) of the LPA.
(f) When the invested money is withdrawn from the trust investment account it is deposited
back into the trust bank account. The trust creditors can then be paid from the trust bank
account.
(g) Interest earned on Section 86(3) trust investments must be paid over to the LPFF and
therefore is not the property of the legal practitioner nor the trust creditors.

QUICK Trust money may not be deposited directly into a trust

NOTE
investment account.
All trust monies must flow through the trust bank account to the trust
investment account.

QUICK
NOTE Interest earned on section 86(3) trust investments must be paid over to the
Legal Practitioners Fidelity Fund (LPFF) or its nominee. It is therefore not
the property of the legal practitioner nor the trust creditors.

Notes

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EXAMPLE 7.1

SA Attorneys received R50 000 from a client, S Africa (client reference no TCL1) and R10 000
from client, A South (client reference no TCL2) for future services.

EXPLANATION 7.1

The trust cash receipts journal will be prepared as follows:

TCRJ6
Trust
creditors
control Bank
Date Details Fol. R R
30/06 S Africa TCL1 50 000 50 000
30/06 A South TCL2 10 000 10 000
60 000 60 000
30/06 Dr – Trust bank account GL1
30/06 Cr – Trust creditors control GL2

The trust cash receipts journal will be posted to the general ledger and trust creditors ledger
as follows:
General ledger

Dr Trust creditors control GL2 Cr

20.6 R 20.6 R
01/06 Trust cash receipts TCRJ 60 000
Dr Trust bank GL1 Cr
20.6 R 20.6 R
01/06 Trust cash receipts TCRJ 60 000

Trust creditors ledger

Dr A South TCL1 Cr
20.6 R 20.6 R
01/06 TCRJ 50 000

Dr S Africa TCL2 Cr
20.6 R 20.6 R
01/06 TCRJ 10 000

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EXAMPLE 7.2

The accounting treatment of section 86(2) and section 86(3) trust investments

The following information was obtained from the accounting records of SA Attorneys for June
20.6:

2020
June
1 The balance of the trust bank account of SA Attorneys with South Bank amounted
to R250 000. E North decided to invest funds of R80 000, which were not
immediately required, in a special interest-bearing savings account with Africa Bank.

30 SA Attorneys withdrew R80 800 from the savings account with Africa Bank and
deposited it in the trust bank account.

30 Interest of R700 was earned during the month on the trust bank account held in
South Bank.

REQUIRED:

Prepare the following in the accounting records of SA Attorneys for June 20.6:

1. Subsidiary journals, properly totalled:

1.1. Trust cash receipts journal
1.2. Trust cash payments journal
1.3. Trust journal

2. Ledgers, properly balanced:

2.1. General ledger
2.2. Trust creditors ledger
2.3. Trust creditors list

Notes

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EXPLANATION 7.2

SA ATTORNEYS

1. Subsidiary journals
1.1 Trust cash receipts journal for June 20.6
TCRJ6
Trust
creditors Trust
control bank
Date Details Fol. R R
30/06 Sec 86(3) trust investment – Africa Bank [trust creditor] TCL1 80 800 80 800
30/06 Interest received on trust bank account TCL2 700 700
81 500 81 500
30/06 Dr – Trust bank account B1
30/06 Cr – Trust creditors control account B2

1.2 Trust cash payments journal for June 20.6

TCPJ6
Trust
creditors Trust
control bank
Date Details Fol. R R
30/06 Sec 86(3) trust investment – Africa Bank (trust creditor) TCL1 80 000 80 000
30/06 Dr – Trust creditors control account B2
30/06 Cr – Trust bank account B1

1.3 General journal for June 20.6

GJ6
Debit Credit
Date Details Fol. R R
30/06 Sec 86(3) trust investment – Africa Bank (trust creditor) TCL1 800
Legal Practitioners Fidelity Fund (LPFF) (trust creditor) TCL2 800
Transfer of interest to the LPFF
800 800
30/06 Dr – Trust creditors control account B2
30/06 Cr – Trust creditors control account B2
Journal narration

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The LPFF is a trust creditor of the attorney’s practice because the interest
earned does not belong to the attorney’s practice. The interest accrues to the
LPFF and is held in trust by the practice until it is paid over to the LPFF.

2. Ledgers
2.1 General ledger

Dr Trust bank B1 Cr
20.6 R 20.6 R
01/06 Balance b/d 250 000 01/06 Trust payments TCPJ6 80 000
30/06 Trust receipts TCRJ6 81 500 30/06 Balance c/d 251 500
331 500 331 500
Jun 30 Balance b/d 251 500
The balance of the Trust bank account must equal
the Trust creditors control account at month end

Dr Trust creditors control B2 Cr

20.6 R 20.6 R
30/06 Trust bank TCPJ6 80 000 01/06 Balance [Per question] b/d 250 000
30/06 Journal debits GJ6 800 30/06 Trust bank TCRJ6 81 500
30/06 Balance c/d 251 500 30/06 Journal credits GJ6 800
332 300 332 300
30/06 Balance b/d # 251 500

2.2 Trust creditors ledger 100% of the interest earned on the Sec 86(3) Folio – Trust
investment (R80 000) is owed to the LPFF Creditors Ledger

Dr Sec 86(3) trust investment – Africa Bank TCL1 Cr

20.6 R 20.6 R
01/06 Trust bank TCPJ6 80 000 30/06 Trust bank TCRJ6 80 800
30/06 LPFF GJ6 800
80 800 80 800

Payment from trust bank account Withdrawal of investment and payment into trust
into an investment account bank account R80 000 (capital invested + R800
interest received on investment

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Dr Legal Practitioners Fidelity Fund TCL2 Cr

R 20.6 R

The credit is from the Trust Cash Receipts Journal. 30/06 Trust bank TCRJ6 700
The reference to 6 indicates the page no of the TCRJ 30/06 Trust investment –
on which the transaction is recorded.
South Bank GJ6 800
1 500

From P6 of the General Journal

The interest earned on the section 86(2) trust bank account and section
86(3) trust investment accrues to the LPFF but has not been paid to the
LPFF. Therefore, the R1 500 is still owed to the LPFF on 30 June.

Check the balance of the trust creditors control general ledger account –

2.3 Trust creditors list

Account
Name of client reference R
Opening balance [No detail of the composition of this amount given in question] TCL1 250 000
Legal Practitioners Fidelity Fund TCL2 1 500
Total # 251 500

It is this point that differentiates

7.3 Section 86(4) of the Legal Practice Act 28 of 2014 the type of investments

A trust account practice may, on the instructions of any person (i.e. client), open a
separate trust savings account or another interest-bearing account for the purpose of
investing therein any money deposited in the trust account of that practice, on behalf of
such person over which the practice exercises exclusive control as trustee, agent
or stakeholder or in any other fiduciary capacity. Therefore the requirements differ from section
86(3) as the decision to invest surplus trust money is made by the client and the following
applies.

(a) The LPA requires that the bank statements be endorsed with a reference to section 86(4)
of the LPA. The name of the trust investment account in the trust creditors ledger must
also include a reference to the specific section of the legislation, for example, S Africa
sec 86(4) trust investment – ABC Bank.
(b) As is the case with section 86(3) the trust money may not be deposited directly into a
trust investment account but must flow through the trust bank account. The same rule is
applicable to the withdrawal of the money invested.

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(c) Interest accrued on money deposited in terms of this section must be paid as follows:
► 5% of the interest accrued on money in terms of this paragraph must be paid over
to the LPFF and vests in the LPFF.
► 95% of the interest accrued on the above money must be paid over to the person
who gave instructions for the investment to be made.
(d) With effect from 1 March 2019, the 5% of the trust interest earned will be paid monthly
to the LPFF in terms of section 86(5), as provided for by Rule 54.14.16.4 made under
the authority of Section 95(1) of the LPA.
(e) Only 5% of the interest earned on Section 86(4) trust investments vests with the LPFF
and therefore is not the property of the legal practitioner nor the trust creditors.

7.4 Schematic summary of the process of investing trust money:

Client deposits money into the practices’ trust bank account

A legal practitioner of their own Every trust account The client, instructs legal
accord decides to invest the practice must keep a practitioner to invest the
money, currently not required trust account at a bank money in LPFF approved
for a specific purpose in LPFF with which the LPFF has bank until it is needed for
approved bank until it is needed entered into an fees and costs.
for fees and costs. arrangement.

Paid into a trust investment Paid into a trust investment

account. Either a savings account. Either a savings
account or other interest- account or other interest-
bearing account. bearing account

Section 86(3) investment Section 86(2) investment Section 86(4) investment

Interest earned on the investment to be Interest earned on the investment to be

paid over annually to the LPFF (100%) paid over monthly to the client (95%)
and LPFF (5%)

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EXAMPLE 7.3

The accounting treatment of section 86(4) trust investments

The following information was obtained from the accounting records of SA Attorneys for May
2020:

2020
30/04 The balance of the trust bank account after the deposit into the trust bank account
but before the transfer to the trust investment account was R440 000.
01/05 Client E North deposited R280 000 into the trust bank account of SA Attorneys. The
R280 000 was the deposit payable by E North on a property purchased from the
City Council.
01/05 E North instructed SA Attorneys to invest the total amount of R280 000 in an
interest-bearing investment account at Africa Bank in terms of section 86(4) of the
LPA, until the transfer of property is affected.
30/05 The property was registered in the name of E North.
31/05 SA Attorneys withdrew the investment of E North and received R282 400, which
was deposited into the trust bank account.

REQUIRED:

Prepare the following in the accounting records of SA Attorneys for May 2020:

1. Subsidiary journals, properly totalled:

1.1. Trust cash receipts journal
1.2. Trust cash payments journal
1.3. Trust journal

2. Ledgers, properly balanced:

2.1. General ledger
2.2. Trust creditors ledger

Notes

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EXPLANATION 7.3

SA ATTORNEYS

1. Subsidiary journals
1.1 Trust cash receipts journal for May 20.6
TCRJ5
Trust
creditors
control Bank
Date Details Fol. R R
31/05 E North sec 86(4) investment – Africa Bank TCL1 282 400 282 400
31/05 Cr – Trust creditors control account GL2
31/05 Dr – Trust bank account GL2

1.2 Trust cash payments journal for May 20.6

TCPJ5
Trust
creditors
control Bank
Date Details Fol. R R
01/05 E North sec 86(4) investment – Africa Bank TCL1 280 000 280 000
31/05 Dr – Trust creditors control account GL2
31/05 Cr – Trust bank account GL1

1.3 Trust journal for May 20.6

GJ5
Debit Credit
Date Details Fol. R R
31/05 E North sec 86(4) investment: Africa Bank TCL1 2 400
E North (95% of interest received) TCL2 2 280
LPFF (5% of interest received) TCL3 120
Transfer of interest received to trust creditor and LPFF
2 400 2 400
31/05 Dr – Trust creditors control account GL2
31/05 Cr – Trust creditors control account GL2

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2. Ledgers
2.1 General ledger
Dr Trust bank account GL1 Cr
20.6 R 20.6 R
01/05 Opening balance b/d 720 000 01/05 Trust payments TCPJ5 280 000
31/05 Trust receipts TCRJ5 282 400 Closing balance c/d 722 400
1 002 400 1 002 400
31/05 Opening balance b/d 722 400

Dr Trust creditors control GL4 Cr

20.6 R 20.6 R
31/05 Trust bank account TCPJ5 280 000 01/05 Opening balance b/d 720 000
Journal debits GJ5 2 400 31/05 Trust bank account TCRJ5 282 400
Closing balance c/d 722 400 Journal credits GJ5 2 400
1 004 800 1 004 800
31/05 Opening balance b/d 722 400

2.2 Trust creditors ledger

Dr E North sec 86(4) investment – Africa Bank TCL1 Cr

20.6 R 20.6 R
01/05 Trust bank account TCPJ5 280 000 31/05 Trust bank account TCRJ5 282 400
31/05 E North/LPFF GJ5 2 400
282 400 282 400

Dr E North TCL2 Cr
R 20.6 R
01/05 Balance b/d 280 000
E North sec 86(4)
trust investment -
31/05 Africa Bank TJ5 2 280
282 280

Dr Legal Practitioners Fidelity Fund (LPFF) TCL3 Cr

R 20.6 R
30/05 E North sec 86(4)
trust investment –
Africa Bank TJ5 120
120

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The interest earned on the section 86(4) trust investment accrues to the LPFF but has not yet
been paid to the fund. The R120 is therefore still owed to the LPFF on 30 May.

The trust creditor’s account does not decrease when the investment is made. The trust bank
account (trust asset) decreases whilst the client’s investment account (trust asset)
increases.

EXAMPLE 7.4

The accounting treatment of Section 86(3) and Section 86(4) trust investments.

The following information was obtained from the accounting records of SA Attorneys for
August 20.6:

Balances at 1 August 20.6:

R
Trust bank 337 500
Trust creditors 337 500

The trust creditors consist of:

R
A South 112 500
B Mpuma 93 750
C Kwazulu 56 250
D Western 75 000
The following transactions took place during August 20.6:

Aug
2020
1 SA Attorneys invested R150 000 of the trust funds not immediately required, in a
special savings account at Africa Bank until 31 August 20.6.
3 B Mpuma requested SA Attorneys to invest the amount in his trust account in a
special savings account to his benefit. SA Attorneys invested the amount in West
Bank.
5 A South requested SA Attorneys to invest R58 000 of his trust funds in a savings
account at Africa Bank. SA Attorneys acted accordingly.
22 SA Attorneys withdrew the investment made on 3 August 20.6 and received
R95 625. On request of B Mpuma, SA Attorneys paid R48 750 to F Cape, his
daughter, and the rest of the amount in the trust account of B Mpuma to him.
31 SA Attorneys redeemed half the trust investment made on 1 August 20.6 and
received R76 825 which was paid into the trust bank account.

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REQUIRED:

Prepare the following in the accounting records of SA Attorneys for August 20.6:

1. Subsidiary journals, properly totalled:

1.1 Trust cash receipts journal
1.2 Trust cash payments journal
1.3 Trust journal

2. Ledgers, properly balanced:

2.1 General ledger
2.2 Trust creditors ledger

SA ATTORNEYS

1. Subsidiary journals

1.1 Trust cash receipts journal for August 20.6

TCRJ5
Details Trust
Trust creditor creditors
control Bank
Date Fol. R R
22/08 B Mpuma sec 86(4) trust investment – West Bank TCL6 95 625 95 625
31/08 Sec 86(3) trust investment – Africa Bank TCL5 76 825 76 825
172 450 172 450
31/08 Dr – Trust bank account GL1
31/08 Cr – Trust creditors control account GL2

1.2 Trust cash payments journal for August 20.6

TCPJ8
Details Trust
Trust creditor creditors
control Bank
Date Fol. R R
01/08 Sec 86(3) trust investment – Africa Bank TCL5 150 000 150 000
03/08 B Mpuma sec 86(4) trust investment – West Bank TCL6 93 750 93 750
05/08 A South sec 86(4) trust investment – Africa Bank TCL7 58 000 58 000
22/08 B Mpuma (Payment of F Cape) TCL2 48 750 48 750
22/08 B Mpuma TCL2 46 781 46 781
397 281 397 281
31/08 Dr – Trust creditors control account GL2
31/08 Cr – Trust bank account GL1

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1.3 Trust journal for August 20.6

GJ8
Debit Credit
Date Details Fol. R R
31/08 Sec 86(3) trust investment – Africa Bank (trust creditor) TCL5 1 825
LPFF (trust creditor) (100%) TCL7 1 825
Transfer of interest received to the LPFF
31/08 B Mpuma sec 86(4) investment – West Bank
(trust creditor) TCL6 1 875
B Mpuma (trust creditor) (1 875 x 95%) TCL2 1 781
LPFF (trust creditor) (1 875 x 5%) TCL8 94
Transfer of interest received to client and LPFF
3 700 3 700
31/08 Dr – Trust creditors control account GL2
31/08 Cr – Trust creditors control account GL2

2. Ledgers
2.1 General ledger

Dr Trust bank account GL1 Cr

20.6 R 20.6 R
01/08 Balance b/d 337 500 31/08 Trust payments TCPJ8 397 281
31/08 Trust receipts TCRJ5 172 450 Balance c/d 112 669
509 950 509 950
31/08 Balance b/d 112 669

Dr Trust creditors control GL2 Cr

20.6 R 20.6 R
31/08 Balance TCPJ8 397 281 01/08 Balance b/d 337 500
Journal debits GJ8 3 700 31/08 Trust receipts TCRJ5 172 450
Balance c/d 112 669 Journal credits GJ8 3 700
c/d
513 650 513 650
31/08 Balance b/d 112 669

2.2 Trust creditors ledger

Dr A South TCL1 Cr
R 20.6 R
01/08 Balance b/d 112 500
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Dr B Mpuma TCL2 Cr
20.6 R 20.6 R
22/08 Trust payments TCPJ8 48 750 01/08 Balance b/d 93 750
Trust payments TCPJ8 46 781 31/08 B Mpuma Sec 86(4)
investment – West
Bank GJ8 1 781
95 531 95 531

Dr C Kwazulu TCL3 Cr
R 20.6 R
01/08 Balance b/d 56 250

Dr D Western TCL4 Cr
R 20.6 R
01/08 Balance b/d 75 000

Dr Sec 86(3) trust investment – Africa Bank TCL5 Cr

20.6 R 20.6 R
01/08 Trust payments TCPJ8 150 000 31/08 Trust receipts TCRJ5 76 825
31/08 LPFF GJ8 1 825 31/08 Balance c/d 75 000
151 825 151 825
31/08 Balance b/d 75 000

Dr B Mpuma sec 86(4) investment – West Bank TCL6 Cr

20.6 R 20.6 R
03/08 Trust payments TCPJ8 93 750 31/08 Trust receipts TCRJ5 95 625
31/08 B Mpuma (trust
creditor) GJ8 1 875
95 625 95 625

Dr A South sec 86(4) trust investment – Africa Bank TCL7 Cr

20.6 R R
05/08 Trust payments TCPJ8 58 000

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Dr Legal Practitioners Fidelity Fund TCL8 Cr

R 20.6 R
31/08 Sec 86(3) trust
investment –
Africa Bank GJ8 1 825
B Mpuma sec
86(4) investment
– West Bank GJ8 94
1 919

QUICK • The interest earned on the section 86(3) trust investment accrues to the
NOTE
LPFF but has not yet been paid to the fund. The R1 825 and R94 is
therefore still owed to the LPFF on 31 August.
• A trust investment is made from the trust bank account and not the trust
creditor’s account.
• Investments made in accordance with section 86 are the only trust
creditors accounts that may reflect debit balances.
• The balance of the trust creditors control account and the total of the
list of trust creditors balances should be the same.

Trust reconciliation

Trust creditors: R
A South 112 500 Cr
C Kwazulu 56 250 Cr
D Western 75 000 Cr
Legal Practitioners Fidelity Fund 1 919 Cr
Sec 86(3) trust investment: Africa Bank (75 000) Dr
A South sec 86(4) trust investment: Africa Bank (58 000) Dr
112 669
Trust assets – Trust bank account 112 669 Dr

7.5 The LPC Rules for the Attorneys’ Profession in respect of trust monies

7.5.1 Introduction

A practising attorney is a member of the Law Society of South Africa (LSSA) and must abide
by the Legal Practice Council (LPC) Rules (hereafter referred to as the LPC Rules). The LPC
Rules may by no means supersede the provisions made in section 86 of the Legal Practice
Act, 28 of 2014 regarding the trust bank account or trust investments.

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 Learning unit 7

The LPC Rules furthermore prescribe that proper accounting records be kept in an official
language of South Africa that comply with generally accepted accounting practice and these
records are to be kept for at least five years. The accounting records should clearly differentiate
between monies received for, or on account of any person or monies paid for, or on account
of any person.

LPC Rules 54.14.16.1 to 54.14.16.5 determine the payment of interest to the LPFF.

7.5.2 Appointment of an auditor/public accountant

The attorney’s practice has a legal obligation to appoint an auditor/public accountant who has
to report to the Law Society. The auditor has to perform the duties and responsibilities imposed
by the LPA, the Companies Act, 61 of 2008 (as amended), as well as the Public Accountants
and Auditors Act, 51 of 1951 (as amended).

The LPA, as well as the LPC Rules require an annual audit report to be rendered by the
auditor. The report must be issued on the prescribed form of the LSSA and submitted to the
LSSA within six months after the reporting period, usually the year end of the legal practice.
Although it is the auditor’s responsibility to issue and submit the report, the legal practice is
obliged to ensure that the report is issued and submitted to the LSSA in time. The report must
be submitted to the Law Society by the auditor and not the legal practice. In the report, the
auditor must state whether the accounting records and specifically the trust records, complied
with the LPA and the LPC Rules.

The auditor has an obligation to report on the following:

• A trust deficit as soon as it is detected. A trust deficit will arise when the total of the trust
creditors balances exceeds the trust monies.
• The result of queries by the auditor on any material issue regarding the accounting records
of the attorney’s practice that was not dealt with to his satisfaction.
• Restricted access to the accounting records of the legal practice after, reasonable requests
by the auditor.

7.5.3 Accounting to clients

The attorney’s practice should, within a reasonable time after the performance or earlier
termination of any mandate, account to his client in writing and retain a copy of each such
account for not less than five years. The following information must be included in the account
statement:

– All amounts, appropriately explained, received in connection with the matter concerned.
– All expenses incurred and other payments regarding the matter.
– Fees and other charges levied or raised against the client and in instances where a fee
has been agreed upon, the fact that it was agreed upon and the amount.
– The amount owing to or by the client.

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7.5.4 Consequences of non-compliance with prescriptions

The consequences of non-compliance with section 86 of the LPA and the LPC Rules for the
Attorneys’ Profession can be:
– the removal from the roll;
– suspension from practice; and
– other kinds of instruction, for example, more frequent audit reports that state that the
attorney’s records were in order.

EXAMPLE 7.5

The recording of trust, business and transfer transactions in an attorney’s practice

On 1 May 2020 the following information was obtained from the accounting records of SA
Attorneys:
R
Business bank 4 300
Note - the opening balance of the Trust bank account is
Trust bank equal to the opening balance of the Trust creditors control
37 000

Client control [Opening balance] 1 350

D Western 250
S Africa 1 100

Trust creditors control [Opening balance] 37 000

E North 24 800
F Cape 11 700
B Mpuma 500

The following transactions occurred in the attorney’s practice of SA Attorneys during May 20.6:

2020
May
1 B Mpuma is divorcing his wife and deposited an amount of R15 000 with SA Attorneys
to cover fees and charges, including advocate fees.
2 B Mpuma gave a written instruction that R7 000 be invested in an interest-bearing
account at SA Bank. SA Attorneys executed the instruction. [Section 86(4) investment]
5 SA Attorneys instructed advocate G Natal to handle B Mpuma’s divorce and paid his
account to the amount of R6 000. [Payment is made from the trust bank account, as B
Mpuma has sufficient funds in his trust creditors account]
6 SA Attorneys decided to invest R10 000 of the trust monies in the trust bank account
not needed for immediate use, in a special savings account at West Bank. [Section

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86(3) investment, there was no instruction from the client to invest, but the practice may do so
of its own accord]
14 SA Attorneys received a combined cheque from D Western, a client, to the amount of
R700 for:
• Settlement of his account for services rendered in a collection matter (fees have
been charged during the previous month) – R250.
• A deposit for fees still to be levied for the preparation of a purchase contract – R450.
24 The divorce case of B Mpuma was settled, and SA Attorneys levied a fee of R4 000.
SA Attorneys withdrew the investment made on 2 May 20.6 and received R7 100. The
attorney’s practice paid the amount due to B Mpuma after all transfers were made. [If
the practice levies a fee for services rendered the transaction is recorded in the Fees Journal]
28 SA Attorneys withdrew R5 000 (excluding interest) of the trust investment made on
6 May 20.6. Interest on the investment amounted to R100.
30 SA Attorneys received written instruction from E North to invest R12 000 of his funds
held in trust, in an interest-bearing savings account at SA Bank. SA Attorneys obliged.
[Section 86(4) investment – client instructed investment]

REQUIRED:

Prepare the following in the accounting records of SA Attorneys for May 20.6:
1. Subsidiary journals, property totalled:
1.1 Business cash receipts journal
1.2 Trust cash receipts journal
1.3 Trust cash payments journal
1.4 Trust journal
1.5 Fees journal
1.6 Transfer journal
2. Ledgers, properly balanced:
2.1 General ledger
2.2 Trust creditors ledger
2.3 Clients ledger

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EXPLANATION 7.5

SA ATTORNEYS

1. Subsidiary journals

1.1 Business cash receipts journal for May 20.6 BCRJ5

Business
Sundries bank
Date Details Fol. R R
14 Trust bank (transfer D Western) TCPJ5 250 250
24 Trust bank (transfer B Mpuma) TCPJ5 4 000 4 000
4 250 4 250
31/05 Dr – Business bank B2

Account number
Investment in SA Bank withdrawn from investment account and
deposited in Trust bank account. The amount is the original investment
of R7 000 plus the interest earned on investment of R100

1.2 Trust cash receipts journal for May 20.6 TCRJ5

Trust
creditors Trust
control bank
Date Details Fol. R R
01/05 B Mpuma (trust creditor) TCL3 15 000 15 000
14/05 D Western (trust creditor) TCL4 700 700
24/05 B Mpuma sec 86(4) investment – SA Bank (trust creditor) TCL6 7 100 7 100
28/05 Sec 86(3) trust investment – West Bank (trust creditor) TCL5 5 100 5 100
27 900 27 900
31/05 Dr – Trust bank B1
31/05 Cr – Trust creditors control B4

The amount is the original investment of R5 000

Debit trust bank
plus the interest earned on investment of R100 Credit trust creditors control account

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1.3 Trust cash payments journal for May 20.6

TCPJ5
Trust
Trust creditors – All the entries are to the Trust creditors Trust
creditors ledger (TCL) control bank
Date Details Fol. R R
02/05 B Mpuma sec 86(4) investment – SA Bank TCL6 7 000 7 000
05/05 B Mpuma (trust creditor) – Adv F Cape TCL3 6 000 6 000
06/05 Sec 86(3) trust investment) – West Bank TCL5 10 000 10 000
14/05 Business bank (transfer D Western) BCRJ5 250
24/05 B Mpuma TCL3 5 595 5 595
24/05 Business bank (transfer B Mpuma) BCRJ5 4 000
30/05 E North sec 86(4) investment – SA Bank TCL7 12 000 12 000
40 595 44 845
31/05 Dr – Trust creditors control B4
31/05 Cr – Trust bank B1

Debit trust creditors control Credit trust bank account

1.4 Trust journal for May 20.6 TJ5

Trust creditors
Dr Cr
Date Details Fol. R R
24/05 B Mpuma sec 86(4) investment – SA Bank TCL6 100
B Mpuma (100 x 95%) TCL3 95
LPFF (100 x 5%) TCL8 5
Transfer of interest to client and LPFF
28/05 Sec 86(3) trust investment – West Bank TCL5 100
LPFF (100%) TCL8 100
Transfer of interest to the LPFF
200 200
31/05 Dr – Trust creditors control account GL4
31/05 Cr – Trust creditors control account GL4

RECAP Both of the journal entries above are for trust creditors. The interest
earned on the trust investment in SA Bank (Section 86(4) investment) of
R100 is allocated between the client B Mpuma (R95) and the LPFF (R5). The
interest earned on the trust investment in West Bank (Section 86(3)
investment) of R100 is only allocated to the LPFF.

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 Learning unit 7

1.5 Fees journal for May 20.6

FJ5
Clients
control Fees
Date Details Fol. R R
24/05 B Mpuma (client) CL3 4 000
Fees GL5 4 000
Fees charged for divorce
4 000 4 000
31/05 Dr – Clients control account GL3
31/05 Cr – Trust creditors control account GL4

1.6 Transfer journal for May 20.6

TJ5
Debit Credit
Date Details Fol. R R
14/05 D Western (trust creditor) TCL4 250
D Western (client) CL1 250
Transfer of fees from combined payment
24/05 B Mpuma (trust creditor) TCL3 4 000
B Mpuma (client) CL3 4 000
Transfer of account
4 250 4 250
31/05 Dr – Trust creditors control account GL4
31/05 Cr – Clients control account GL3

2. Ledgers

2.1 General ledger

Dr Trust bank account GL1 Cr
20.6 R 20.6 R
01/05 Opening balance b/d 37 000 31/05 Trust payments TCPJ5 44 845
31/05 Trust receipts TCRJ5 27 900 Closing balance c/d 20 055
64 900 64 900
01/06 Opening balance b/d 20 055

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Dr Business bank account GL2 Cr

20.6 R R
01/05 Opening balance b/d 4 300
31/05 Receipts BCRJ5 4 250
8 550

Dr Clients control account GL3 Cr

20.6 R 20.6 R
01/05 Opening balance b/d 1 350 31/05 Journal credits GJ5 4 250
31/05 Fees FJ5 4 000 31/05 Closing balance c/d 1 100
5 350 5 350
01/06 Opening balance b/d 1 100

Dr Trust creditors control account GL4 Cr

20.6 R 20.6 R
31/05 Trust payments TCPJ5 40 595 01/05 Opening balance b/d 37 000
31/05 Journal debits GJ5 200 31/05 Trust receipts TCRJ5 27 900
31/05 Journal debits TJ5 4 250 31/05 Journal credits GJ5 200
31/05 Closing balance c/d 20 055
65 100 65 100
01/06 Opening balance b/d 20 055

Dr Fees GL5 Cr
R 20.6 R
31/05 Clients control FJ5 4 000

2.2 Trust creditors ledger

Dr E North TCL1 Cr
R 20.6 R
01/05 Opening balance b/d 24 800

The interest earned on the section 86(2) trust bank account and section 86(3)
trust investment accrues to the LPFF but has not been paid to the LPFF.
Therefore, the R1 500 is still owed to the LPFF on 30 June.

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Dr F Cape TCL2 Cr
R 20.6 R
01/05 Opening balance b/d 11 700

Dr B Mpuma TCL3 Cr
20.6 R 20.6 R
05/05 Trust bank – advocate TCPJ5 6 000 01/05 Opening balance b/d 500
24/05 B Mpuma (client) TJ5 4 000 31/05 Trust receipts TCRJ5 15 000
31/05 Trust payments TCPJ5 5 595 31/05 B Mpuma sec 86(4)
investment: SA Bank GJ5 95
15 600 15 600

Dr D Western TCL4 Cr
20.6 R 20.6 R
14/05 D Western (client) TJ5 250 14/05 Trust receipts TCRJ5 700
31/05 Closing balance c/d 450
700 700
01/06 Opening balance b/d 450

Dr Sec 86(3) trust investment: West Bank TCL5 Cr

20.6 R 20.6 R
06/05 Trust payments TCPJ5 10 000 28/05 Trust receipts TCRJ5 5 100
31/05 LPFF GJ5 100 31/05 Closing balance c/d 5 000
10 100 10 100
01/06 Opening balance b/d 5 000

Dr B Mpuma sec 86(4) investment: SA Bank TCL6 Cr

20.6 R 20.6 R
02/05 Trust payments TCPJ5 7 000 24/05 Trust receipts TCRJ5 7 100
24/05 B Mpuma (trust creditor) GJ5 100
7 100 7 100

Dr E North sec 86(4) investment: SA Bank TCL7 Cr

20.6 R R
30/05 Trust payments TCPJ5 12 000

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Dr Legal Practitioners Fidelity Fund TCL8 Cr

R 20.6 R
31/05 B Mpuma sec 86(4) GJ5 5
investment: SA Bank GJ5 100
Sec 86(3) trust
investment: West
Bank
105

The interest earned on the section 86(4) trust investment accrues to the
LPFF, but the R5 has not yet been paid over to the fund per the question.
Therefore, the R100 is still owed to the LPFF on 31 May. Interest earned
on a section 86(4) trust investment must be paid over monthly to the LPFF.

List of trust creditors balances on 31 May 20.6

R
E North 24 800
F Cape 11 700
B Mpuma –
D Western 450
Sec 86(3) trust investment: West Bank (5 000)
B Mpuma sec 86(4) investment: SA Bank –
E North sec 86(4) investment: SA Bank (12 000)
LPFF 105
Balance of trust bank account on 31 May 20.6 20 055

2.3 Clients ledger

Dr D Western CL1 Cr
20.6 R 20.6 R
01/05 Opening balance b/d 250 14/05 D Western (trust creditor) TJ5 250
250 250

Dr S Africa CL2 Cr
20.6 R R
01/05 Opening balance b/d 1 100

Dr B Mpuma CL3 Cr
20.6 R 20.6 R
24/05 Fees FJ5 4 000 24/05 B Mpuma (trust creditor) TJ5 4 000
4 000 4 000

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EXAMPLE 7.6

The recording of trust investments and transfer transactions in the books of prime entry
and ledgers of an attorney’s practice

On 30 June 20.6 the following information was obtained from the accounting records of South
Attorneys:

1. The balance of the trust creditors control account and the trust bank accounts amounted
to R800 000 each. [This is the opening balance of the trust creditors control account in the general
ledger]

2. After South Attorneys investigated their trust creditors, the following was found:
(a) On 1 June 20.6, F Cape, a client of South Attorneys gave the instruction that
R100 000 kept in trust on her behalf, be invested in an interest-bearing savings
account until registration of the unmovable property. On the same day, South
Attorneys invested R100 000 at African Bank on behalf of F Cape. On 30 June 20.6
when closing the account, South Attorneys received an EFT transfer for R101 000
and paid the interest earned on the investment to the beneficiaries. [There is therefore
no provision for the interest as in examples 8.1, 8.2 and 8.3 and learning activity 1]

(b) On 1 June 20.6 a client of South Attorneys, G Natal, gave written instruction for
R200 000 held in trust on his behalf, to be invested in interest bearing accounts.
South Attorneys immediately executed the instruction and invested the money in SA
Bank.
(c) On 1 June 20.6 South Attorneys decided to invest R150 000 of the surplus funds not
immediately needed, in an interest-bearing savings account with West Bank. When
closing the account on 30 June 20.6 South Attorneys received R152 000 and issued
a cheque for R1 950 regarding the payment of interest earned on the investment,
after bank charges were deducted.

REQUIRED:

Prepare the following in the accounting records of South Attorneys for June 20.6:

1. Subsidiary journals, property totalled:

1.1 Trust cash receipts journal
1.2 Trust cash payments journal
1.3 Trust journal

2. Ledgers, properly balanced:

2.1 General ledger
2.2 Trust creditors ledger

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 Learning unit 7

EXPLANATION 7.6

SOUTH ATTORNEYS

1. Subsidiary journals

1.1 Trust cash receipts journal for June 20.6

TCRJ6
Trust
creditors
control Bank
Date Details Fol. R R
30/06 F Cape sec 86(4) investment: African Bank (trust creditor) TCL3 101 000 101 000
30/06 Sec 86(3) trust investment: West Bank (trust creditor) TCL5 152 000 152 000
253 000 253 000
30/06 Cr – Trust creditors control account GL2
30/06 Dr – Trust bank account GL1

1.2 Trust cash payments journal for June 20.6

TCPJ6
Trust
creditors
control Bank
Date Details Fol. R R
01/06 F Cape sec 86(4) investment: African Bank (trust creditor) TCL3 100 000 100 000
01/06 G Natal sec 86(4) investment: SA Bank (trust creditor) TCL1 200 000 200 000
01/06 Sec 86(3) trust investment: West Bank (trust creditor) TCL4 150 000 150 000
30/06 LPFF TCL6 1 950 1 950
30/06 F Cape (trust creditor) TCL5 950 950
30/06 LPFF TCL6 50 50
452 950 452 950
30/06 Dr – Trust creditors control account GL4
30/06 Cr – Trust bank account GL1

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1.3 Trust journal for June 20.6

TJ6
Debit Credit
Date Details Fol. R R
30/06 F Cape sec 86(4) investment: African Bank (trust creditor) TCL3 1 000
F Cape (trust creditor) TCL1 950
LPFF TCL6 50
Transfer of interest to client and LPFF
30/06 Sec 86(3) trust investment: West Bank (trust creditor) TCL5 2 000
LPFF (trust creditor) TCL6 2 000
Transfer of interest to LPFF
3 000 3 000
30/06 Dr – Trust creditors control account GL4
30/06 Cr – Trust creditors control account GL4

The following journal was not required but is shown for illustrative purposes:

Business general journal for June 20.6

Debit Credit
Date Details Fol. R R
30/06 LPFF (client) 50
Bank charges 50
Trust bank charges claimed back from LPFF by deducting
it from trust interest earned

The R50 balance of the LPFF trust creditor account will be transferred to the business bank
account in the same way as for the transfer of the attorney’s fees.

2. Ledgers

2.1 General ledger

Dr Trust bank account GL1 Cr
20.6 R 20.6 R
01/06 Balance b/d 800 000 30/06 Trust payments TCPJ6 452 950
30/06 Trust receipts TCRJ6 253 000 Balance c/d 600 050
1 053 000 1 053 000
01/07 Balance b/d 600 050

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 Learning unit 7

Dr Trust creditors control GL2 Cr

20.6 R 20.6 R
30/06 Trust payments TCPJ6 452 950 01/06 Balance b/d 800 000
Journal debits GJ6 3 000 30/06 Trust receipts TCRJ6 253 000
Balance c/d 600 050 30/06 Journal credits GJ6 3 000
1 056 000 1 056 000
01/07 Balance b/d 600 050

2.2 Trust creditors ledger

Dr F Cape TCL1 Cr
20.6 R 20.6 R
30/06 Trust payments TCPJ6 950 01/06 Balance b/d 100 000
30/06 Balance c/d 100 000 30/06 F Cape sec 86(4)
investment: African
Bank TJ6 950
100 950 100 950
01/07 Balance b/d 100 000

Dr G Natal TCL2 Cr
R 20.6 R
01/06 Balance b/d 200 000

Dr F Cape sec 86(4) investment (African Bank) TCL3 Cr

20.6 R 20.6 R
30/06 Trust payments 01/06 Trust receipts TCRJ6 101 000
F Cape (trust
creditor) TCPJ6 100 000
30/06 F Cape/LPFF TJ6 1 000
101 000 101 000

Dr G Natal sec 86(4) investment (SA Bank) TCL4 Cr

20.6 R R
30/06 Trust payments TCPJ6 200 000

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Dr Sec 86(3) trust investment: West Bank TCL5 Cr

20.6 R 20.6 R
30/06 Trust payments TCPJ6 150 000 30/06 Trust receipts TCRJ6 152 000
30/06 LPFF TJ6 2 000
152 000 152 000

Dr Legal Practitioners Fidelity Fund TCL6 Cr

20.6 R 20.6 R
30/06 Trust payments TCPJ6 1 950 30/06 Sec 86(3) trust
30/06 Trust payments TCPJ6 50 investment (West TJ6 2 000
30/06 Balance c/d 50 Bank)
30/06 F Cape – sec 86(4)
trust investment
(African Bank) TJ6 50
2 050 2 050
01/07 Balance b/d 50

2.3 List of trust creditors balances on 30 June 20.6

R
F Cape 100 000
G Natal 200 000
Other trust creditors 500 000
F Cape sec 86(4) trust investment: African Bank -
G Natal sec 86(4) trust investment: SA Bank (Debit balance) (200 000)
Surplus funds Sec 86(3) trust investment: West Bank -
LPFF 50
Balance of trust bank account on 30 June 20.6 600 050

2.4 List of trust creditors balances on 1 June 20.6 (Check opening balance)

R
F Cape 100 000
G Natal 200 000
Other trust creditors [balancing amount] 500 000
Balance of trust bank account on 1 June 20.6 800 0001

1
Opening balance of the trust creditors control account in the general ledger (per question)

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 Learning unit 7

7.6 Self-assessment exercises

Questions Answers

What is the acronym for

Legal Practice Act 28 of
2014?
What is the acronym LPFF?
State the requirements of
section 86(2) of the Legal
Practice Act 28 of 2014.

State the requirements of

section 86(3) of the Legal
Practice Act 28 of 2014.

State the requirements of

section 86(4) of the Legal
Practice Act 28 of 2014.

State the requirements of

section 86(5)(a)) of the
Legal Practice Act 28 of
2014.

What is a section 86(3) trust

investment?

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 Learning unit 7

What is a section 86(4) trust

investment?

Who are the beneficiaries of

the investment interest on a
section 86(3) trust
investment?

Who are the beneficiaries of

the investment interest on a
section 86(4) trust
investment?

How do you treat the

interest received on a
section 86(3) trust
investment?

How do you treat the

interest received on a
section 86(4) trust
investment?

If the interest received on a

section 86(3) trust
investment amounted to
R1 200, indicate who is
entitled to the interest.

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 Learning unit 7

If the interest received on a

section 86(4) trust
investment amounted to
R5 000, indicate who is
entitled to the interest.

38