Workbook

IIE Module Manual ACLA5211
ACCOUNTING FOR LAW

WORKBOOK 2021
(First Edition: 2019)
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© The Independent Institute of Education (Pty) Ltd 2021 Page 1 of 72

THE ACCOUNTING CYCLE
Capture of transaction data on source documents DAILY
Analysis of transactions and entry into subsidiary journals DAILY
Posting to General Ledger MONTHLY
Balancing of accounts and extracting a Trial Balance MONTHLY
Preparing Financial Statements

and interpretation of results
ANNUALLY

We will be concentrating on transactions which occur in an attorney’s practice, which is

essentially a service undertaking. There is one extremely important difference between the
bookkeeping of retailers and that of attorney practices. An attorney practice is required to
keep two sets of books. i.e. a set of books to record all business transactions and another
set of books to record all transactions related to Trust monies. Attorneys render services and
are entitled to be remunerated as such, BUT attorneys are also required, from time to time, to
hold monies on behalf of clients. This money does not belong to the attorney and must be kept
separate from the business transactions.
The understanding of accounting terminology is critical to analysing business and trust

transactions and the subsequent recording of these transactions i.e. the understanding of the
basics of accounting. The most important accounting terms and their definitions are listed
below.
ASSETS
An asset is a resource that is owned/controlled by the business. An asset can be converted

into cash; if it is not already cash.
Assets are resources from which future economic benefits are expected to flow to the
entity. Assets can be employed in various ways in order to obtain economic benefit:
Assets can be used for settlement of debt or other obligations.

Assets can be distributed to the owner(s) of the entity.
There are two categories of assets i.e. Non-Current Assets and Current Assets:
Non-current assets are assets which are normally kept for a period longer than one year,
used within the business and cannot quickly be converted into cash e.g. land and buildings.
Current assets are assets which are normally kept for a period shorter than a year and can
easily be or are expected to be converted into cash within a year e.g. debtors.
LIABILITIES
A liability is any amount of money that is owed by a business to another

business or person. The business is liable (has an obligation) to pay the amount
of money owed. The settlement of a liability will result in an outflow of cash
(outflow of economic benefit) at some time in the future when the debt is repaid.
Liabilities can also be divided into two categories i.e. Non-Current Liabilities and Current
Liabilities.
Non-current liabilities are payable over a period longer than one year e.g.
mortgage loans and any other long-term loans.
Current liabilities are payable within one year e.g. bank overdraft, creditors.

EXPENSES
An expense cannot be owned by the business. Expenses are the costs incurred
in running a business to produce the income from which the net profit will result.
Examples of normal expenses are salaries and wages, repairs and maintenance,
postage, stationery used, audit fees, advertising, etc.
INCOME
Income is the Revenue earned as a result of rendering a service to clients which

is also referred to as Fees. Other income may be received in the form of interest
or rent, etc.
CAPITAL
This refers to what the owner(s) of the business brings into the business with
the intention that the capital will be used by the business in order to attain the
primary goal of the business, i.e. making a profit.
DRAWINGS
This refers to what the owner of the business takes out of the business for his/her personal
use and is normally cash.
OWNER’S EQUITY
Equity is the share of the business that belongs to the owner. In other words,
his/her net worth in the business. This is calculated by subtracting the value
of the liabilities from the value of the assets of the business.
CREDITORS
A creditor is a business or person that another business owes money to, e.g. a
supplier of stationery, advertising, water & electricity or a trust creditor.
Each creditor will have a separate account in the general ledger.
DEBTORS
A debtor is a business or person that owes another business money, for

example an attorney may offer a client a service which the debtor would pay
off the amount owing over several months.
Each debtor will have a separate account in the general ledger.

THE DIFFERENCE BETWEEN AN ATTORNEY’S BUSINESS BOOKS AND AN

ATTORNEY’S TRUST BOOKS.
BUSINESS BOOKS TRUST BOOKS
Record all transactions related to All monies held in ‘trust’ i.e. belongs
business to clients and not the attorney.
e.g. capital contribution; Normally clients pay money before
rent paid or received; the attorney supplies the service
payment of telephone, water & required. The attorney is only entitled
electricity and other expenses; to receive payment for his/her
issuing of invoices to clients for service once it is completed.
services rendered and receive
payment from business clients
Attorneys are not allowed to use any

monies in trust to pay for business
transactions.
These two sets of books are linked but MUST be kept separate.
Monies will be transferred to the business bank account from the trust bank
account when the money accrues to the attorney.

DOUBLE ENTRY PRINCIPLE
Each transaction will affect TWO general ledger accounts. When

entering transactions into the general ledger, the double entry principle must
be applied i.e. for every debit entry there must be a credit entry.
THE BASIC ACCOUNTING EQUATION
The accounting equation has 3 elements. These three elements are:
Assets (A) Owner’s Equity (OE) Liabilities (L)
These elements can be expressed arithmetically as follows:
Assets = Owners Equity + Liabilities
Every business transaction influences the elements of the accounting equation.
Assets either increase or decrease in value

Equity either increases or decreases in value
Liabilities either increase or decrease in value
The following table illustrates the effect of transactions:
ASSETS OWNERS EQUITY LIABILITIES
DR CR
- +
DR CR DR CR
EXPENSES INCOME
+ - - +
DR CR DR CR
+ - - +

SOME EXAMPLES OF GENERAL LEDGER ACCOUNTS
BUSINESS ACCOUNTS
ASSETS OWNERS EQUITY LIABILITIES
NON-CURRENT Drawings Capital NON-CURRENT
Land & Buildings EXPENSES INCOME Long-term Loan

Furniture
Equipment Subscriptions Fees CURRENT
Vehicles Entertainment Exp Services Rendered
Investments Administrative Exp. Commission Earned Business Creditor
Fixed Deposits Bad Debts/Credit Rent Income Bank Overdraft
Law Library Losses Bad Debts/Credit Vat Output
Audit Fees Losses Recovered Vat Control (SARS)
Bank Charges Interest Income: Current Portion of
CURRENT Donations • Interest on Fixed Long-term Loan
Fuel Deposit/Investment
Business Client (Debtor) Insurance • Interest on
W&E Deposit Postage Overdue A/c
Business Bank Rent Expense • Interest on Credit
Petty Cash Repairs Balance
Vat Input Salaries and Wages
Vat Control (SARS) Stationery
Current Portion of Telephone
Financial Asset Water & Electricity
Interest Expense:
• Interest on Overdraft
• Interest on Loan
• Interest on Overdue
A/c
TRUST ACCOUNTS
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
Trust Bank Trust Clients (Creditors)

Fidelity Fund
NOTE each Business and Trust Client should have their name included in the name of their
account, e.g. Business Client Dali Dlamini and Trust Client Dali Dlamini.
For our purposes we will not be using Debtors Control and Creditors Control Accounts but
rather open separate accounts for each debtor and creditor.
Suppliers who supply equipment or services on credit to the Attorneys practice will be
Business Creditors, each creditor will have their own account.

EFFECT OF TRANSACTION ON ACCOUNTING EQUATION -

STEPS TO TAKE…..
Read the transaction
Choose TWO accounts affected by transaction
Use one of the 2 accounts and
Decide what type of account it is
Decide how it is being affected – i.e. is it increasing/decreasing in value?
As a result, are you going to DEBIT it or CREDIT it? – look at your ±’s table
What effect does it have on the equation?
NB REPEAT STEPS THREE TO SIX FOR THE 2ND ACCOUNT
Remember
INCOMES make the OWNER
INCOME – EXPENSES = PROFIT
EXPENSES make the OWNER
EXPENSES – INCOME = LOSS

SOURCE DOCUMENTS
All transactions are recorded on source documents. Source documents are used to enter the
transactions into the subsidiary journals of the business.
EXAMPLES
• Receipts issued when receiving money
• EFT confirmation payment instruction when paying via electronic funds transfer
• Debit Cards when paying with a business debit card
• Bank deposit slips when depositing cheques and cash into bank account
• Issuing invoices to clients for services rendered (fees)
• Petty Cash Vouchers for payments paid using cash from the petty cash account
• Journal Vouchers for transactions entered into a general journal
Please Note that as of 1 January 2021 cheques will no longer be used as legal tender in
South Africa. We will then ignore all reference to cheques in the textbook.
SUBSIDIARY JOURNALS
Journals are known as books of first entry. All transactions are recorded in the journals
before being posted to the general ledger. REMEMBER a distinction must be made
between the books of the Business and the books of the Trust.
Journals not required in this module

A Petty cash journal and Sheriff or Advocates journal.
EXAMPLES
• BUSINESS Cash Receipts Journal
TOP NOTCH ATTORNEYS

BUSINESS CASH RECEIPTS JOURNAL FOR JANUARY 2021 BCRJ
DATE DOC DETAILS FOL SUNDRIES VAT BUSINESS BUSINESS
NO. OUTPUT CLIENT BANK
Name of sundry
account, or
Name of
business client
(debtor)
• BUSINESS Cash Payments Journal
TOP NOTCH ATTORNEYS8

BUSINESS CASH PAYMENTS JOURNAL FOR JANUARY 2021 BCPJ
DATE DOC DETAILS FOL SUNDRIES VAT INPUT BUSINESS BUSINESS
NO. CREDITOR BANK
Name of
sundry
account, or
Name of
business
creditor

NB
A cash receipts journal and a cash payments journal may be combined into a
cashbook, but we will use separate journals in LU1 and post to the Business Bank
Ledger account. The cashbook incorporates the 2 journals and the bank account in
one. Similarly, with the Trust cash receipts journal and the Trust cash payments
journal
• BUSINESS Petty Cash Journal for reference only
TOP NOTCH ATTORNEYS

BUSINESS PETTY CASH JOURNAL FOR JANUARY 2021 TCPJ
DOC DETAILS FOL SUNDRIES WAGES PETTY
NO. CASH
Name of sundry account
(e.g. stationery), or
Name of employee
receiving wages
• TRUST Cash Receipts Journal
TOP NOTCH ATTORNEYS

TRUST CASH RECEIPTS JOURNAL FOR JANUARY 2021 TCRJ
DATE DOC DETAILS FOL SUNDRIES TRUST TRUST
NO. CLIENT BANK
(investment), or
Name of trust client
(creditor)
• TRUST Cash Payments Journal
TOP NOTCH ATTORNEYS

TRUST CASH PAYMENTS JOURNAL FOR JANUARY 2021 TCPJ
DOC DETAILS FOL SUNDRIES TRUST TRUST
NO. CLIENT BANK
(investment), or
Name of trust client
(creditor)

• Fees Journal (this format of journal differs from that in the textbook – please use this
format)
TOP NOTCH ATTORNEYS

FEES JOURNAL FOR JANUARY 2021 FJ
DATE DOC DETAILS FOL FEES VAT OUTPUT BUSINESS
NO. CLIENT
Name of business
client (debtor)
• General Journal
TOP NOTCH ATTORNEYS

BUSINESS GENERAL JOURNAL FOR JANUARY 2021 GJ
DATE DOC DETAILS FOL DEBIT CREDIT
NO.
Name of account to
be debited
Name of account to
be credited
Narration
• Transfer Journal
TOP NOTCH ATTORNEYS

TRANSFER JOURNAL FOR JANUARY 2021 TJ
DATE DETAILS FOL DEBIT CREDIT
Name of account to be
debited (Trust Client –
creditor)
Name of account to be
credited (Business Client -
debtor)
XX XXX XX XXX
The Totals at the end of the Transfer Journal indicates the amount to be transferred
from the Trust Bank Account to the Business Bank Account.

ACCOUNTS
The General Ledger is the primary accounting record for the business. The general ledger is
divided into several accounts.
There will be an account for every type of transaction e.g. telephone expense. All transactions
pertaining to telephone will be recorded in this account.
A ledger account is shown in the form of a T and is known as a T-account. The left-hand side
of the T is called the DEBIT side and the right-hand side is called the CREDIT side.
A ledger is made up of columns (see below). The DEBIT side is the same as the CREDIT side.
Every asset, liability, equity, income and expense has its own account in the general ledger.
TOP NOTCH ATTORNEYS

BUSINESS GENERAL LEDGER
DR LAW LIBRARY CR
Year Year
Fo Fo
Month Details Amount Month Details Amount
lio lio
Day Day
WHEN DRAWING UP A GENERAL LEDGER ACCOUNT IT IS IMPORTANT TO

COMPLETE ALL THE COLUMNS:
Year 2021
Month Feb entered once on both sides
Day 28 each date is entered once as required
Details Business Bank name of the contra account
Folio BCRJ folio of journal from which information is taken
Amount 28 000 the rand value
PLEASE NOTE when working in the general ledger we will use individual Debtors and
Creditors accounts (i.e., individual accounts for each debtor and creditor). When
drawing up the Trial Balance and other statements, the individual accounts can be
totalled and presented as one amount or kept separate.

BALANCING AN ACCOUNT
Each account is balance at the end of every month.
1. Where only one entry is made – leave as is
RENT
Date Contra Account Fol Amount Date Contra Account Fol Amount
2021
Feb 8 Business Bank BCPJ 300
2. Where more than one amount appears on one side only – draw a line under last
entry and total
WAGES
2021
Feb 8 Business Bank BCPJ 7 000
15 Business Bank BCPJ 7 000

14 000
3. Where the same amount appears on both sides – draw total lines under each
amount
BUSINESS CLIENT JOE SLOW (DEBTOR)

2021 2021
Feb 8 Fees BFJ 8 000 Feb10 Business Bank BCRJ 8 000
OR – add a total with double lines at the bottom of each side
BUSINESS CLIENT JOE SLOW (DEBTOR)

2021 2021
Feb 8 Fees BFJ 8 000 Feb10 Business Bank BCRJ 2 000
Business Bank BCRJ 6 000
8 000 8 000

4. Where amounts appear on both sides – add up each side – calculate the
balancing amount – add it to the ‘smallest’ side – total each side (double line
under totals) – bring balance down to opposite side
BUSINESS BANK ACCOUNT

2021
2021
Feb 1 Balance b/d 8 000 Feb Total Payments BCPJ 56 000
28
28 Total Receipts BCRJ 78 000 Balance ** c/d 30 000
86 000 86 000
2021
Mar1 Balance b/d 30 000
** the balance is the difference between the total of the debit side (R86 000) and the
credit side (R56 000).

THE TRIAL BALANCE
After all transactions have been recorded in the general ledger, it is customary to check the
accuracy of the postings of these transactions. We must ascertain whether all the debits equal
all the credits (as it should in a double entry system)
All the balances in the general ledger accounts are transferred to a statement known as a Trial
Balance which consists of a debit and credit column. Debit balances from the general ledger
are recorded in the debit column and credit balances are recorded in the credit column. The
totals of the two columns should be the same.
The Trial Balance is drawn up at the end of each month.
Assets, Expenses and Drawings should have DEBIT balances

while Liabilities, Income and Capital should have CREDIT balances.
The purpose of a trial balance is to ensure that no errors or miscalculations have occurred and
while the Trial Balance does NOT form part of the financial statements but rather is used as
the starting point when preparing the financial statements i.e. the Statement of Profit or Loss
and the Statement of Financial Position.
EXAMPLE OF A TRIAL BALANCE
TOP NOTCH ATTORNEYS

BUSINESS TRIAL BALANCE AT 28 FEBRUARY 2021
DEBIT CREDIT
STATEMENT OF FINANCIAL POSITION SECTION
Business Bank 5 650
Capital 58 000
Drawings 2 500
Equipment 38 000
Law Library 50 000
Loan: BB Back 9 500
ABC Furnishers (Creditor) 10 250
NOMINAL ACCOUNTS SECTION
Fees 33 500
Rent 6 000
Salaries & Wages 4 500
Telephone 800
Repairs 3 800
R111 250 R111 250

EXAMPLE OF A STATEMENT OF PROFIT OR LOSS and STATEMENT OF FINANCIAL

POSITION
TOP NOTCH ATTORNEYS

BUSINESS STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED
28 FEBRUARY 2021
INCOME 300 000
Fees earned 200 000
Commission earned 100 000
EXPENSES (115 000)

Wages 50 000
Advertisements 10 000
Rent 40 000
Stationery 15 000
Net Profit R285 000
TOP NOTCH ATTORNEYS

BUSINESS STATEMENT OF FINANCIAL POSITION AT 28 FEBRUARY 2021
ASSETS
NON-CURRENT ASSETS 600 000
Equipment 300 000
Law Library 300 000
CURRENT ASSETS 450 000
Business Debtors 400 000
Business Bank 50 000
TOTAL ASSETS R1 050 000
OWNERS EQUITY AND LIABILITIES
OWNERS EQUITY
Capital** 550 000
NON-CURRENT LIABILITIES
Long term loan 300 000
CURRENT LIABILITIES
Business Creditors 200 000
TOTAL OWNERS EQUITY AND LIABILITIES R1 050 000
** Capital amount is made up of opening balance of capital + Net Profit – Drawings.

LEGAL PRACTICE ACT 28 OF 2014 sections 84 to 91 is outlined in your textbook

(annexure A) and you are required to be able to answer questions relating to the
following sections:
Section 86 Trust Accounts
LEGAL PRACTICE COUNCIL RULES made under the authority of the LEGAL
PRACTICE ACT – Government Gazette 41781 of 20 July 2018 is outlined in your
textbook (annexure B) and you are required to be able to answer questions relating to
the following sections:
Accounting Requirements – General

No. 54.6
No. 54.8
No. 54.9
No. 54.10
No. 54.11
No. 54.12
No. 54.13
No. 54.14.7 up to and including 54.14.14
No. 54.19
No. 54.20
No. 54.36
This will be regarded as self-study as these specific items will NOT necessarily be
discussed during class time.

LEARNING UNIT 1
AN INTRODUCTION TO ACCOUNTING
You are required to do Pre-reading of Chapter 1 ‘The nature and function of accounting’
and Chapter 2 Accounting terms and concepts – Legislation and rules’ in the textbook.
Textbook Chapters 3, 4, 6, 8 & 13 cover
The basic accounting equation

The accounting system
Books of prime entry
Ledger accounts
Transfer procedures
Please refer to these chapters in the textbook as well as notes and examples in this
workbook.
Procedure to follow when money is paid to the Attorneys:
1. All monies paid in advance of work done from future clients is paid into the
Trust Books. I.E. this money belongs to the Trust Client not the Business.
2. Once the work is completed and the client has been invoiced, the money can be
transferred from the Trust Books to the Business Books.
3. Once the work has been completed and a client still has a balance owing in
his/her business account. Payment of this account will go directly to the
Business Bank Account.
4. In today’s world most payments are made via Electronic Fund Transfers (EFT)
which allows money to pass between bank accounts without delay via computer
-based systems. An advantage of an EFT payment is that money is transferred
“instantly”. Other forms of payment are in cash or using a debit card or credit
card.

EXERCISE ONE
Draw up a table with the following columns:

NO. TRUST OR ACCOUNT ACCOUNT ASSETS OWNERS LIABILITIES
BUSINESS DEBITED CREDITED EQUITY
TRANSACTION
e.g. Business Business Capital +40 000 +40 000 0
Bank
Analyse the following transactions which took place during the first month of business
at TOP NOTCH ATTORNEYS and show the effect of the transactions on the accounting
equation. (IGNORE VAT)
Calculate whether the business made a profit or loss during its first month of trading
and calculate the balance of the business bank as at the end of the month.
Charles started a business called TOP NOTCH ATTORNEYS

1
He deposited R100 000 into the banking account of the business.
He acquired a computer for the business for R6 000 and paid with the business debit
2
card.
3 Stationery was bought, paid with the business debit card, R300.
4 Cash received form Dumi Dlamini, R17 000, for future legal services.
Accounted to (sent an invoice) Dumi Dlamini for services rendered for the week
5
amounted to R8 000.
6 Received a deposit from Susie Snyman, R15 000, in respect of divorce proceedings
7 Paid insurance premium of R750 via EFT.
8 Bought equipment on credit for R15 000 from Office Equip Ltd.
9 Paid water and electricity for the month, via EFT, R1 300.
10 Negotiated a loan for the business and received R100 000 from AB Bank
11 Paid R500 wages to an employee using petty cash.
State which account will be debited, and which account will be credited to reflect the
12 monies due to Business Bank Account from Trust Bank Account. Indicate the amount
to be transferred.

EXERCISE TWO

TRANSACTION
e.g. Business Business Capital +40 000 +40 000 0
Bank
Analyse the following transactions which took place during month of February 2021 at
Laylow Attorneys and show the effect of the transactions on the accounting equation.
(IGNORE VAT)
Calculate whether the business made a profit or loss during February 2021. Calculate
the balance of the business bank account at the end of February 2021 – assume an
opening balance of R27 400.
The owner, Justin Lowder, withdrew R50 000 from his capital account via EFT and
1
deposited the money into his own private banking account.
2 Paid his secretary’s salary, R25 000 via EFT.
3 Stationery was bought and paid for using the business debit card, R300.
Cash received from Mbali Mabuso and Joe Seremo, R9 000 and R45 000
4
respectively, for future legal services.
5 Lowder withdrew R7 500 via EFT, to pay his child’s school fees for the month.
Accounted to (sent an invoice) Mbali Mabuso for services rendered for the week
6
amounted to R9 500.
7 Received an invoice from RR Printers for printing completed, R3 600.
8 Accounted to Joe Seremo for services rendered R50 000.
9 Paid annual membership fees to the Law Society, R7 500, via EFT.
10 Received the amount outstanding (cash) from Joe Seremo.
11 Wrote off Mbali Mabuso’s business debtors account as irrecoverable.
to be transferred.

EXERCISE THREE

TRANSACTION
e.g. Business Rent Business -4 000 -4 000 0
Bank
Analyse the following transactions which took place in the books of Zando Attorneys
during the February 2021 owned and run by Zanele Zando and show the effect of the
transactions on the accounting equation. (IGNORE VAT)
Calculate whether the business made a profit or loss during February 2021. Calculate
the balance of the business bank account at the end of February 2021 – assume an
opening balance of negative R11 600.
1 Received R5 000 in cash from Dali Dlamini, immediately after his consultation.
Received R14 000 in cash from Sibusiso Sindane as a deposit for future divorce
2
proceedings.
3 Zanele Zando took her children to lunch and paid with a business debit card, R585.
Purchased a new computer for the receptionist, R9 000, on credit from Office
4
Equipment Ltd.
5 Paid salaries to employees, R22 000, via EFT.
Rendered legal services in respect of a will and charged Susie Strong, R2 600 for the
6
consultation.
7 Sent Sibusiso Sindane an invoice for R13 600 for services rendered re his divorce.
Dali Dlamini attended another consultation and left without paying. An invoice for R5 525
8
was emailed to him.
Paid the first of six instalments to Office Equipment Ltd as part payment for the
9
computer, via EFT. (See no. 4)
Zanele Zondo took new clients out for a dinner and paid with a business debit card,
10
R2 300.
Dali Dlamini and Susie Strong made separate direct deposits into the entity’s banking
11
account to settle their accounts.
to be transferred.
Sibusiso Sindane requested that monies held in trust be refunded to him. This was done
13
via EFT.
14 Zanele Zando contributed a desk with a book value of R7 000 to the office.

EXERCISE FOUR

TRANSACTION
e.g. Business Business Rent +4 000 +4 000 0
Bank Income
Analyse the following transactions which took place in the books of Tom Cowell
Attorneys during the January 2021 and show the effect of the transactions on the
accounting equation. (IGNORE VAT)
Calculate whether the business made a profit or loss during January 2021. Calculate
the balance of the business bank account at the end of January 2021 – assume an
opening balance of positive R131 555.
The owner, Attorney Tom Cowell, deposited R95 000 cash into the business bank
1
account as additional capital.
2 Purchased stationery on credit from ABS Stationers for R37 500.
R5 800 charged to Client A Book, was correctly entered into the Fees Journal and
3 posted to the Fees account correctly but was posted to the account of Client B Book.
Correct the error.
Charged interest at 12% per annum for three months on the overdue account of Client
4
C Book, who owes an amount of R2 300.
Received cash from Client D Book for R3 000. D Book’s debt had been written off as
5
irrecoverable 6 months previously.
6 Purchased a vehicle on credit from BB Garage, R360 000.
Paid rent of R14 000 for the month via EFT. Tom Cowell Attorneys rents offices from
7
AHD Rental Agency.
Received R15 000 and R25 000 from two clients, Li Lun and Wei Lun, respectively. Both
8
clients paid deposits for future legal services.
9 Paid Mobile World R17 400 for a new telephone system fitted in the office, via EFT.
10 Accounted to Li Lun for R14 500 for services rendered.
11 Paid Mobile World R26 000 for telephone use for the previous month, via EFT.
to be transferred.

VAT – VALUE ADDED TAX
VAT OUTPUT is tax charged by the law practice – a LIABILITY

• for services rendered by the law practice
VAT INPUT is tax paid (or payable) by the law practice – an ASSET
• on any items purchased by the law practice
• on services rendered to the law practice
The Vat Output (LIABILITY) and Vat Input (ASSET) accounts are closed off to the Vat
Control Account at the end of every 2nd month
For the purposes of this module, we will follow the category B with regard to how
often the VAT vendor (i.e. the law practice) has to report to SARS on VAT. VAT will be
closed to the Control Account at the end of February, April, June, August, October and
December each year, if the exercise specifically asks that the INPUT and OUTPUT VAT
accounts should be closed to the Control Account.
The balance of the Vat Control Account represents the amount payable by the law practice
to the Receiver of Revenue (SARS) and is therefore a LIABILITY account
OR
the amount the Receiver of Revenue (SARS) owes the law practice and therefore it is an
ASSET account)
HOW TO CALCULATE VAT
Cost Price + VAT = Selling Price

100%+ 15% = 115%
100/115 x Rselling price = Rprice exclusive of vat

15/115 x Rselling price = vat
OR
To calculate Vat Inclusive if given Vat Exclusive:

Reclusive x 1.15 = Rinclusive
To calculate Vat Exclusive if given Vat Inclusive:

Rinclusive ÷ 1.15 = Rexclusive
NOTE Cost Price = fees charged without VAT to clients

Selling Price = fees charged including VAT to clients
Cost Price = price of article/service purchased without VAT

Selling Price = price paid by purchaser including VAT
VAT is collected by the Vat Vendor for the Receiver of Revenue, the VAT
amount does not belong to the Vat Vendor.

VAT RATES
Vat can be charged at 0% (zero rated) or 15% (rate currently used in SA)
Zero rated items include:

• petrol and oil
• brown bread, milk, mielie meal
• goods used for agricultural services
Standard rated items include:

• Fees
• Assets purchased by the law practice e.g.
o Equipment
o Land & Buildings
o Law Library Books
• Items supplied e.g.
o Stationery
o Advertising
o Water & Electricity
o Telephone
o Internet expenses
o Bank Charges
o Credit Losses/Credit Losses Recovered
o Rent
o Membership of professional bodies
Some items are EXEMPT from VAT. Examples include:

• financial services – interest on loans; interest on overdrafts
• accommodation in a dwelling
• transport of passengers by road and rail
• educational and childcare services
• Sheriff fees
• Advocate costs
Items which include VAT but fall into the non-allowable category e.g.
• refreshments and equipment purchased for use by the staff
• entertainment of clients
• membership fees to clubs and societies
• vehicles purchased other than delivery vehicles

EXERCISE FIVE
CALCULATE THE MISSING AMOUNTS IN THE TABLE BELOW:
PRICE (VAT EXCL.) VAT PRICE (VAT INCL.)

R4 500 ?? ??
?? ?? R95 760
?? R300 ??
R95 600 ?? ??
?? R1 200 ??
?? ?? R467 699

EXERCISE SIX

TRANSACTION
e.g. Business Telephone Business -575 -500 0
Bank
Vat Input +75
Analyse the following transactions which took place in the books of Upright Attorneys
during the February 2021 and show the effect of the transactions on the accounting
equation.
All amounts include VAT at 15%, where applicable, unless otherwise stated.
Calculate the VAT owed to/by SARS at the end of February 2021. Balance as at
1 February 2021, R2 125 owing to SARS.
1 Paid the office rent via EFT, R12 489.

2 Received R5 000 from Linda Makamu as a deposit on future legal services.
3 Purchased office stationery on credit from ABC Stationers, R1 426
4 The owner withdraws R5 000 for his own use.
5 Paid salaries and wages to employees, R15 000 via EFT.
6 THE BANK charged R69 as bank charges.
Purchased a new office chair and desk on credit from ABC Furnishers, R15 000
7
(exclusive VAT).
8 Accounted to Linda Makamu for services rendered, R5 175.
9 Paid for petrol using the business debit card, R500, for the owner’s private vehicle.
Returned the office chair to ABC Furnishers and received their credit note, R5 000
10
(exclusive VAT).
11 Paid via EFT, the amount owing to ABC Stationers.
12 Received R8 625 from a tenant for next month’s rent of an office sublet to her.
13 Linda Makamu paid her account in full.
to be transferred.

EXERCISE SEVEN

TRANSACTION
e.g. Business Telephone Business -575 -500 0
Bank
Vat Input +75
Analyse the following transactions which took place in the books of Upright Attorneys
during the February 2021 and show the effect of the transactions on the accounting
equation.
All amounts include VAT at 15%, where applicable, unless otherwise stated.
Bill Collins paid R10 000 by direct deposit as a deposit for future legal work to be
1
completed.
2 Nellie Fish paid R5 000 in cash as a deposit for her divorce proceedings.
3 Paid the telephone account via EFT, R6 700.
4 Purchased a couch for the staff relaxation area, and paid R12 400 via EFT.
5 Negotiated a loan and received R500 000 from ABBA Bank.
6 Accounted to Bill Collins for legal work completed, R6 500.
7 Accounted to Nellie Fish for her divorce proceedings, R7 500.
8 Received interest on credit balance, R45.
9 Purchased 3 new office desks, on credit, from ABC Furnishers, R12 400 each.
10 Nellie Fish paid her outstanding account in full
Paid entertainment costs of R5 400 using the business debit card. Ollie Upright had
11
entertained two VIP future clients.
12 Paid R17 000 as rent for Ollie Upright’s private dwelling, via EFT.
to be transferred.
Trust Client Collins requested a refund to be paid into his banking account reflecting the
14
amount owing in his account.

EXERCISE EIGHT
The following balances appeared in the business books of Coetzee Attorneys at the end of
their first year of practice, 28 February 2021:
BUSINESS TRIAL BALANCE AT 28 FEBRUARY 2021 DEBIT CREDIT

Capital 460 000
Drawings 123 000
Equipment 260 000
Law Library 310 000
Vat Input 3 000
Vat Output 37 000
Loan: BB Back 247 000
Business Creditors 62 000
Fees 948 500
Rent 144 000
Telephone 92 500
Repairs 37 500
Stationery 29 700
Subscriptions 65 000
Bank Charges 1 500
Credit Losses 45 000
Credit Losses Recovered 35 000
R1 829 000 R1 829 000
REQUIRED
1. Prepare the Statement of Profit and Loss for the year ended 28 February 2021.
2. Prepare the Statement of Financial Position as at 28 Februray 2021
3. Comment on the profit or loss for the year ended 28 February and suggest measures
to improve it.

EXERCISE NINE
Torez Tazer commenced practice as an attorney on 1 March 2021. He registered as a VAT

Vendor and all amounts include VAT of 15%, where applicable, unless otherwise indicated.
The following transactions, amongst others, took place during March 2021:
Transactions for March 2021:
1 Tazer deposited R350 000 in the current banking account of the practice, TT Attorneys.
3 Negotiated a lease for an office and paid R21 500 via EFT: R10 000 being a deposit
and the remainder being the rent for March 2021.
6 Purchased office furniture and equipment on credit from Office Equip Ltd, R102 495.
9 Rendered legal services to a new client, Joan Pillay, and charged her R10 300.
Returned damaged office furniture to Office Equip Ltd and received their credit note
for R22 875.
11 Purchased lunch for the staff, R545, paid with the business debit card.
15 Purchased stationery for office use, R2 650, paid with the business debit card.
23 Charged client Tracey Naidoo, R14 360 (exclusive VAT) for services rendered.
25 Joan Pillay made a direct deposit into TT Attorneys’ current banking account to settle
her account.
Paid the full amount owing to Office Equip Ltd via electronic funds transfer.
REQUIRED
Record the above transactions in the following journals (total the journals):
1. Business Cash Receipts Journal for March 2021.
2. Business Cash Payments Journal for March 2021.
3. Fees Journal for March 2021.
4. General Journal for March 2021. Narrations ARE required.
5. Open, post to and balance the following ledger accounts:
Business Bank Account
Office Equip Ltd (Business Creditor)
Fees
Stationery

EXERCISE TEN
Lucy Lauren practises under the name of Lauren Attorneys. Lauren Attorneys is a registered
VAT Vendor and all amounts include VAT of 15%, where applicable, unless otherwise
indicated.
Balances on 1 June 2021 in the Business General Ledger:
Capital R350 000

Business Bank R143 000 (Favourable)
Equipment R126 000
Law Library R425 000
Fees R845 000
Business Client Sally Snow (Debtor) R45 000
Business Client Julie Jube (Debtor) R38 000
ABC Stationers (Business Creditor) R25 000
Vat Input R35 000
Vat Output R92 000
Salaries and Wages R398 000
Stationery R46 000
Rent Expense R56 000
Balances on 1 June 2021 in the Trust General Ledger:
Trust Bank R83 000

Trust Client Sally Snow (Creditor) R55 000
Trust Client Toby Taylor (Creditor) R28 000
Transactions for June 2021:
1 Lucy Lauren withdrew R20 000 from her capital contribution via EFT.
4 Paid R14 000 via EFT as rent for the office.
5 Completed divorce proceedings for Toby Taylor and accounted to him for R32 000.
10 Purchased stationery on credit from ABC Stationers, R11 000 (excluding VAT).
A new client, Romeo Ronaldo, makes a direct deposit of R40 000 for future legal
services.
13 Paid entertainment costs of R2 500 with the business debit card. This was for a
celebration dinner after a successful defence of a client.
17 Julie Jube’s attorney informs Lauren Attorneys that she is insolvent and makes a direct
deposit amounting to 45 cents in the rand to settle her debt. The remaining debt must
be written off.
Purchased a new computer for the secretary on credit from Office Equip Ltd, R10 925.
24 Accounted to Romeo Ronaldo for legal services completed, R40 000 (excluding VAT).
Toby Taylor settled his debt with a direct deposit.
29 Bank charges amounted to R524.
Paid salaries of staff via EFT, R127 000.
30 Transferred the necessary monies from the Trust Bank account to the Business Bank
Account.
Close Vat Input and Vat Output accounts to Vat Control.

REQUIRED
Record the above transactions in the following business journals (total the journals):
1. Business Cash Receipts Journal for June 2021.
2. Business Cash Payments Journal for June 2021.
3. Trust Cash Receipts Journal for June 2021.
4. Fees Journal for June 2021.
5. General Journal for June 2021. Narrations ARE required.
6. Transfer Journal for June 2021.
7. Open and post to and balance all the ledger accounts (both business and
trust accounts).
8. Prepare a business Trial Balance at 30 June 2021.
EXERCISE ELEVEN
Peter and Sons Attorneys in Law practice in Johannesburg. They are registered for VAT and
all amounts include VAT at 15%, where applicable, unless otherwise stated.
Balances on 1 March 2021 in the Business General Ledger:
Capital R400 000

Business Bank R265 500 (Favourable)
Equipment R272 750
Fees R545 000
Business Client Joe Joseph (Debtor) R64 000
ABC Furnishers (Business Creditor) R55 000
Vat Input R51 000
Vat Output R81 750
Balances on 1 March 2021 in the Trust General Ledger:
Trust Bank R55 000

Trust Client Adam Adams (Creditor) R25 000
Trust Client Jayson Jansen (Creditor) R30 000
1 Paid ABC Furnishers the amount owing on 1st, using business debit card.
3 Received interest on credit balance (Bank Account) R139.
5 Paid R29 900 via EFT to Slate Agency for 2 advertisements due to be released in April
2021.
7 Purchased refreshments for the staff, R350 and paid with business debit card.
8 Accounted to the following clients for services rendered:
Adam Adams R19 550
Jayson Jansen R27 600
12 Purchased office stationery from ABC Stationers and paid with business debit card,
R12 500 (exclusive VAT).
15 Paid via EFT for an annual insurance policy, R26 450.

20 Received cash from Joe Joseph in payment of his account.

25 Received R6 700 from Cindy Clark as a deposit for her future divorce.
26 Peter Senior withdrew R15 000 cash for his own use, using the business debit card at
the local ATM.
27 Sent Cindy Clark an account for R3 900 for services rendered.
28 Paid the salaries and wages via EFT, R45 000.
Purchased new books for the Law Library and paid via EFT, R14 950.
Paid R32 250 via EFT to ABC Rental company for new offices, R15 000 being the
deposit and the remained the rent for April 2021.
Paid R74 750 via EFT to ABC Movers to move the contents of the office to the new
premises.
31 Transferred monies due to Business Bank Account from Trust Bank Account.
REQUIRED
1. Prepare the following journals using the transactions above:

Business Cash Receipts and Cash Payments Journals; Fees Journal; Transfer
Journal and the Trust Cash Receipts for March 2021.
2. Post to and balance the general ledger accounts for both the business and trust
books.
3. Prepare a trial balance at at 31 March 2021 for the business ledger accounts.
4. Prepare a Statement of Profit and Loss and Statement of Financial Position as at

31 March 2021.
EXERCISE TWELVE
Laidler Attorneys practice in Cape Town. They are registered for VAT and all amounts
include VAT at 15%, where applicable, unless otherwise stated.
Balances on 1 February 2021 in the Business General Ledger accounts:
Capital R750 000

Business Bank R57 600(unfavourable)
Equipment R820 000
Loan: ABBA Bank R500 000
Fees R1 351 400
Business Client Juanita Jones (Debtor) R33 000
Law Bookstore (Business Creditor) R265 000
Salaries and Wages R924 154
Water and Electricity R65 000
Telephone R99 000
Rent Expense R103 500
Bank Charges R2 346
Vat Input R34 000
Vat Output R111 000

Transactions for February 2021:
1 Dawid Jones and Neville Naidu made payments of R15 000 and R40 000 respectively
as deposits for future divorce proceedings.
2 Received a direct deposit from Juanita Jones to settle her account.
3 Paid Law Bookstore R50 000 on account, via EFT
5 Accounted to the clients for services rendered:
Dawid Jones R11 500 (exclusive VAT)
Neville Naidu R41 975 (inclusive VAT)
7 Purchased refreshments for the staff, R1 250, paid with business debit card.
9 Received R15 000 and R25 000 from a new clients Kagiso Zulu and Siyanda Bhengu,
respectively, as deposits for future legal work to be completed.
12 Purchased new office furniture on credit from ABC Furnishers R16 675.
15 Paid via EFT for an annual insurance policy, R32 499.
16 Accounted to the clients for services rendered:
Kagiso Zulu R18 400
Siyanda Bhengu R25 300.
17 Returned a table to ABC Furnishers as it was broken in delivery, received a credit note
from them for R5 175.
26 Joan Laidlaw withdrew R25 000 cash for her own use, using the business debit card at
the local ATM.
28 Paid the salaries and wages via EFT, R65 000.
Both Kagiso Zulu and Siyanda Bhengu paid the amounts owing via EFT to settle their
accounts.
Received an invoice from ABC Stationers for printing done, R6 500 (exclusive VAT).
Paid the following via separate EFT’s:
Water and Electricity R5 290
Telephone R3 795
Rent R17 250
The bank statement stated that Bank Charges for the month amounted to R391 and
interest on overdraft R173.
Paid interest on loan for month of February at 12% per annum via EFT. Paid R50 000,
via EFT, off the capital portion of the loan.
Closed the VAT accounts to VAT control and paid SARS the amount owing via EFT.
Transferred monies due to Business Bank Account from Trust Bank Account.
REQUIRED
1. Prepare the following journals using the transactions above:

Business Cash Receipts and Cash Payments Journals; Trust Cash Receipts;
Fees Journal; Transfer Journal and the General Journal for February 2021.
(Include narrations).
2. Post to and balance the general ledger accounts for both the business and trust
books.
3. Prepare separate trial balances at at 28 February 2021 for BOTH the business ledger
accounts and the trust ledger accounts.
4. Prepare a Statement of Profit and Loss and Statement of Financial Position as at
28 February 2021.

EXERCISE THIRTEEN
The following balances appeared in the business books of Peppino Attorneys at the financial
year-end:
BUSINESS TRIAL BALANCE AT 31 MARCH 2021 DEBIT CREDIT

Capital 510 000
Drawings 143 000
Land and Buildings 550 000
Equipment 260 000
Investment at ABBA Bank 350 000
Law Library 660 000
Vat Control 56 000
Business Clients (debtors) 37 000
Business Creditors Law Library (Pty) Ltd 145 000
Fees 2 310 500
Rent Income 154 000
Telephone 98 000
Stationery 35 000
Subscriptions 65 000
Bank Charges 11 500
Credit Losses 15 000
Interest on investment 35 000
R3 210 500 R3 210 500
REQUIRED
1. Prepare the Statement of Profit and Loss for the year ended 31 March 2021.
2. Prepare the Statement of Financial Position as at 31 March 2021.

EXERCISE FOURTEEN
TEST YOUR KNOWLEDGE
MULTIPLE CHOICE QUESTIONS – CHOOSE THE CORRECT ANSWER
14.1 Which two accounts in the Business General Ledger would be used to record
the purchase of a new computer in a law firm, paid for via EFT?
A Debit Capital; Credit Equipment.

B Debit Equipment; Credit a Business Creditor.
C Debit Business Bank: Credit Equipment.
D Debit Equipment; Credit Business Bank.
14.2 Jumping Attorneys issues a new client an invoice for work done, R55 200
(inclusive VAT). Calculate the Vat amount and indicate which Vat account would
be debited or credited?
A Debit Vat Input with R7 200.

B Credit Vat Input with R7 200.
C Credit Vat Output with R7 200.
D Debit Vat Output with R7 200.
14.3 Which of the following transactions would increase and decrease business
asset accounts in the business general ledger of a law firm?
A A business debit card used to purchase stationery.

B A business debit card used by the attorney to withdraw money for his/her own use.
C A business debit card used to pay the municipality for the deposit on water and
electricity.
D A business debit card used to purchase fuel for the attorney’s private vehicle.
14.4 Which of the following business general ledger accounts do not attract VAT?
A The fees account.

B The water and electricity account.
C The law library account.
D The sheriffs account.
14.5 Which of the following statements are True?
A Monies received as a deposit for future legal work to be done may be deposited in the
Business Bank Account until the work is completed.
B Monies in the Trust Bank Account may be borrowed by the attorney if he does not
have sufficient money in the Business Bank Account.
C Monies received as a deposit for future divorce proceedings may only be deposited in
the Trust Bank Account.
D Transfers from the Trust Bank to the Business Bank should be done every day.

LEARNING UNIT 2
BANK RECONCILIATION
You are required to do Pre-reading of Chapter 7 ‘Cash controls and bank reconciliation
procedures’ concentrating on control measures concerning cash received and cash
payments and how to deal with Bank Charges on the Trust Banking account as well as
Interest accrued on the Trust Banking account.
We will be using a business cashbook in this learning unit instead of separate cash journals.
The Business CashBook comprises of:

the Business Bank account’s opening balance;
cash received during the month;
cash paid out during the month; as well as
the closing balance of the Business Bank account.
Please note the following difference between an attorney’s business banking account as
recorded in the Business books and the same account when recorded in THE BANK’s
books.
ATTORNEYS BUSINESS BOOKS THE BANK’S BOOKS
ATTORNEY’S BUSINESS BANK

BUSINESS BANK ACCOUNT
ACCOUNT
DR CR DR CR
+ - - +
The same balance will appear in THE
If the business bank account has a debit
BANK’S books as a credit balance because
balance indicating that it is an asset to the
the attorney’s bank account is a liability to
business
THE BANK
And vice versa….. And vice versa…..
If the business bank accounts is overdrawn, An overdraft will have a debit balance in
it will have a credit balance THE BANKS books

An example of supplementary business cashbook beginning with balance of bank account

on 1 February and provisional receipts and payments as at 28 February, then
corrections/additions and final balance
ATTORNEYS AT LAW
SUPPLEMENTARY BUSINESS CASHBOOK for FEBRUARY 2021
1 Balance b/d xx xxx 28 Provisional Payments xx xxx
28 Provisional Receipts x xxx Contra A/c from BS x xxx
Contra A/c from BS xxx Contra A/c from BS x xxx
Balance c/d xx xxx
xxx xxx xxx xxx
1 Balance b/d xx xxx
Contra A/c from Bank Statement = corrections/entries from bank statement
OR
An example of supplementary business cashbook beginning with provisional balance of

bank account on 28 February (which includes the provisional receipts and payments for the
month, then corrections/additions and final balance
ATTORNEYS AT LAW
SUPPLEMENTARY BUSINESS CASHBOOK for FEBUARY 2021
28 Provisional Bal b/d xx xxx 28 Contra A/c from BS x xxx
Contra A/c from BS xxx Contra A/c from BS x xxx
Contra A/c from BS xxx
Balance c/d xx xxx
xxx
xxx xxx
xxx
1 Balance b/d xx xxx
Please use the example of a Bank Reconciliation Statement as per the textbook on
page 105. Note it is imperative that you indicate clearly whether you are adding or
subtracting the amounts – Brackets indicate subtraction!
Banks charge their clients various fees during the month.

e.g. service fees
cash handling fees
cost of debit cards
card fees
etc.
These fees are ALL posted to ONE ACCOUNT known as Bank Charges

EXERCISE FIFTEEN
The following information is taken from the books of Mtsila Attorneys for August and
September 2019:
Business Bank Reconciliation Statement as at 31 August 2019

Favourable (CR) balance as per bank statement 64 040
Add Outstanding deposit 32 824
Correct of Error (ABBA Bank understated Debit card no. 925) (4 033)
Favourable (DR) balance as per bank account 92 831
A list of payments made with a business debit card during

September 2019 (CPJ)
1 No. 1032 for new law library books 5 938
3 No. 1033 for stationery 2 227
6 No. 1034 for refreshments 247
10 No. 1035 for casual wages 4 453
13 No. 1036 for advertisement in local newspaper 2 472
22 No. 1037 for water and electricity 2 720
25 No. 1038 for telephone 1 237
A list of deposits received during September 2019 (CRJ)

1 Business Client Crook (debtor) 36 320
6 Business Client Look (debtor) 39 780
12 Business Client Spook (debtor) 13 836
19 Business Client Chinook (debtor) 29 401
27 Business Client Hook (debtor) 15 565
30 Business Client EBook (debtor) 42 632

Business Bank Statement from ABBA BANK for September 2019

Debit Credit Balance
1 Deposit 32 824 106 286CR
1 Correction to Debit card no. 925 4 033 102 253CR
1 Deposit 36 320 138 573CR
2 Debit card no.1032 5 938 132 635CR
4 Debit card no. 1031 4 841 127 794CR
6 Deposit 39 780 167 574CR
6 Debit card no. 1033 2 227 165 347CR
7 Debit card no. 1034 234 165 113CR
7 Cash Handling Fees 374 164 739CR
7 Direct Deposit from Bluebook 3 235 167 974CR
11 Debit card no. 1035 4 453 163 521CR
12 Deposit 13 836 177 357CR
12 Monthly account fees 154 177 203CR
14 Debit card no. 1036 2 472 174 731CR
15 Debit card no. 1036 2 472 172 259CR
19 EFT Business Client Spook 13 836 158 423CR
19 Debit card no. 1037 2 720 155 703CR
21 Deposit 30 061 185 764CR
23 Debit card no. 1038 1 237 184 527CR
23 Debit card fees 252 184 275CR
26 Debit card no. QPR999 2 339 181 936CR
27 Debit order Act Fast Reaction 4 033 177 903CR
28 Debit order AAA Insurers 7 363 170 540CR
28 Deposit 15 565 186 105CR
Additional Information:
1. ABBA Bank recorded the correct amount for Debit card no.1034.
2. ABBA Bank debited Debit card no.1036 twice in error.
3. The deposit made by Business Client Chinook on 19 September was recorded
correctly on the Bank Statement on 21 September 2019.
4. On 19 September 2019 Business Client Spook was refunded his deposit via EFT
which he had made on the 12 September 2019 as it was agreed that he would
settle his account in full on 31 October 2019.
5. ABBA Bank incorrectly debited Debit card no. QPR999 to the business bank
account. The cheque was drawn by Msila Attorneys.
6. The direct deposit from Bluebook on 7 September 2019 was to settle his account.
7. The debit orders were for Security and Insurance respectively.

REQUIRED
1. Prepare supplementary Business Cashbook for September 2019.
2. Prepare a Bank Reconciliation Statement as at 30 September 2019.
EXERCISE SIXTEEN
The following information relates to NTM Attorneys in Law:
BUSINESS BANK RECONCILIATION STATEMENT AS AT

31 JANUARY 2021
DR Balance per Bank Statement (7 367)
Correction of error 120
CR Balance as per Business Cashbook (7 247)
The provisional balance of the Business Cashbook on 28 February 2021 amounts to positive
R11 107.
A comparison of the business cashbook for February 2021 with the business bank
statement for February 2021 brought the following to light:
1. Items appearing on the business bank statement but not in the business
cashbook:
1.1 A direct deposit made by business client Z Mkhize for R3 148.
1.2 Bank Charges for the month R410.
1.3 Interest on Bank Overdraft R180.
1.4 A debit card entry to the amount of R380, incorrectly debited to NTM Attorneys in
Law’s bank account.
1.5 A stop order of R325 for the monthly insurance premium and a debit order of R898
for payment of the telephone account.
1.6 Correction of the error that appeared on the previous business bank reconciliation.
1.7 It was also found that Debit card no. 785 (for purchases of stationery) appeared in
the business cashbook as R2 163 which it appeared on the business bank statement
as R2 136, which is the correct amount.
2. Items appearing in the business cashbook but not on the business bank
statement:
2.1 A deposit made on the 28 February 2021 for R5 213.
The favourable balance as per the Business Bank Statement as at 28 February 2021
was R6 876.
REQUIRED
1. Prepare the Supplementary Business Cashbook, correctly balanced.
2. Prepare the Business Bank Reconciliation Statement.

EXERCISE SEVENTEEN
The following information relates to Super Attorneys.
The following items, amongst others, appeared on the Bank Reconciliation Statement on
30 April 2021:
Deposit not credited by the Bank 3 750

Correction of error Debit Card No. 8322 2 861
Debit Card No. 8322, drawn by Attorney S Singh on his personal bank account for R2 861,
was debited by The Bank to the business bank account in error.
At the end of May 2021, the bookkeeper identified the following:
1. The outstanding deposit of R3 750 appeared on the May business bank statement.
2. The error made by THE Bank had not yet been corrected.
3. The following items appeared on the business bank statement but not in the business
cashbook:
3.1 A stop order for an insurance premium, R500
3.2 Interest on overdraft, R50
3.3 Service fees, R54.
4. A deposit of R8 261 (cash received for cash services rendered - fees) correctly
reflected on the business bank statement, had been entered in the business
cashbook as R8 621.
5. An amount of R11 721 was deposited by Super Attorneys on 31 May 2021 but did
not reflect on the business bank statement.
6. The provisional balance in the business cashbook as at 31 May 2021 was a negative
R18 778.
7. The Business Bank Statement for May 2021 reflected a closing debit balance
of R34 324.
REQUIRED
1. Prepare the supplementary Business Cashbook, correctly balanced.

EXERCISE EIGHTEEN
The information given below was extracted from the accounting records of TB Attorneys and
Daughter on 31 January 2021.
INFORMATION APPEARING ON THE BANK RECONCILIATION

STATEMENT ON 31 DECEMBER 2020 R
Outstanding Deposit 1 340
The balance of the Business CashBook as at 1 January 2021 amounts to a credit balance of
R11 178 and the provisional cash receipts and cash payments as at 31 January 2021 amount
to R33 220 and R40 921 respectively.
The following information was ascertained when the bank reconciliation process was
undertaken:
1. The deposit for R1 340 appeared on the January 2021 Bank Statement.
2. Debit Card No. 767 appeared on the Bank Statement as R360, while it was recorded
as R630 in the cash payments. The amount on the Bank Statement was the correct
amount. It had been a payment to New Age Advertisements Ltd for an advertisement
placed in its local newspaper.
3. The following charges were on the Bank Statement:
3.1 Service Fees R67
3.3 Interest on Overdraft R175
3.2 Debit Card Commission R366.
4. Debit Card No. 781 in favour of Modern Cars for repairs appeared correctly on the
Bank Statement as R153. It had been recorded in the cash payments as R135.
5. A deposit made on the 29 January 2021 did not appear on the Bank Statement,
R3 900.
6. A deposit for R10 200 appeared on the Bank Statement but not in the journal. It was
made by TT Bank in respect of a fixed deposit of R10 000 which had matured plus
the interest for the last two months.
7. The Bank Statement reflected one stop order in favour of OO Insurers for R510
which was for the owner of TB Attorneys daughter’s own motor car.
8. The Bank Statement showed a unfavourable balance of R13 455 on 31 January 2021.
REQUIRED

EXERCISE NINETEEN
Dlamini Attorneys Business Cashbook reflects a preliminary debit balance of R25 460 on
31 March 2021. Upon receiving the bank statement from THE BANK, and after comparison
with the previous bank reconciliation statement, the March Business Cashbook, the following
differences were identified:
1. Debit Card No. 786, dated 15 March 2021, was recorded in the Cashbook as
R12 550 and on the bank statement as R15 220. The amount in the Cashbook is
correct.
2. A deposit of R14 500 made by Dlamini Attorneys on 29 March 2021 does not appear
on the bank statement.
3. On 25 March 2021 a business client, Octavia Rush, made an EFT payment directly
into the current bank account, R12 000. This deposit does not appear in the
Cashbook.
4. Debit Card No. 888, dated 28 March 2021, for R5 000, had been recorded by THE
BANK in Dlamini Attorneys Trust bank statement, in error. It was a payment for
stationery purchased for the office.
5. A stop order to ABC Rental Company for R11 600 appeared on the bank statement
but not in the Cashbook.
4. On 31 March 2021 on the Bank Statement revealed a positive R13 690 balance.
REQUIRED

EXERCISE TWENTY
Average Attorney’s business cashbook reflects an overdraft balance on

30 June 2021 of R94 739. The bank statement balance on the same date
was R17 977 overdrawn.
A comparison with the bank statement and the cashbook for June 2021 reveals that:
1. Overdraft interest of R1 428 has not been recorded in the cashbook.
2. Bank charges of R1 500 have not been recorded in the cashbook.
3. A deposit of R14 000 is not yet reflected on the bank statement.
4. A direct deposit made by a business client Rory Malcom, R35 000 was
recorded by the attorneys in the trust cashbook instead of the business
cashbook. The amount reflects correctly on the business bank statement.
5. A debit card payment for R12 360 drawn on the trust banking account appears
on the business bank statement.
6. A debit card payment R4 050 drawn on the business banking account does not
appear on the business bank statement but rather on the trust bank statement.
7. Insurance and motor lease stop orders of R10 000 and R12 000 respectively
have not been entered into the cashbook.
8. A deposit of R90 000 made to the trust banking accounts has been incorrectly
reflected on the business bank statement.
REQUIRED
1. Prepare the supplementary business cashbook and balance.
2. Prepare the bank reconciliation statement as at 30 June 2021.

LEARNING UNIT 3
TRUST INVESTMENTS
Attorneys have authorisation to invest trust monies in trust investment accounts. We

deal with two methods of earning interest on investment accounts – in terms of Section
86(3) and section 86(4) of the Legal Practice Act. This is all explained in detail in
Chapter 12 (Trust investments) in your textbook.
EXERCISE TWENTY-ONE
The following information relates to the Trust books of Emoji Attorneys:
Balances as at 1 May 2021:
Trust Bank R205 000

Trust Client Marinos (Creditor) R55 000
Trust Client Espanola (Creditor) R105 000
Trust Client Colombo (Creditor) R45 000
Transactions for May 2021:
1 As an amount of R150 000 in the Trust Bank account will not be required for
the next two months, Emoji Attorneys decides to invest R150 000 in a special
interest-bearing investment account with ABBA Bank for 1 month at an interest
rate of 7.5% in terms of section 86(3).
31 The investment matures and an amount R150 938 with withdrawn and
deposited into the Trust Bank account.
REQUIRED
1. Record the necessary transactions in the Trust Cashbook and Trust General
Journal for May 2021.
2. Prepare, post to and balance the following Trust Ledger accounts:

Section 86(3) Trust Investment account: ABBA Bank
Fidelity Fund account.

EXERCISE TWENTY-TWO
The following information relates to the Trust books of Zorba Attorneys:
Balances as at 1 March 2021:
Trust Bank R162 500

Trust Client Tor (Creditor) R60 000
Trust Client Star (Creditor) R100 000
Fidelity Fund R2 500
1 A new trust client Zacharia deposits R550 000 into the Trust Bank account of
Zorba Attorneys. This is a deposit for a property which Zacharia is to purchase.
The transfer of which is due in 3 months’ time. Zacharia instructs Zorba
Attorneys to invest R500 000 in a special interest-bearing investment account
with ABBA Bank for the 3 months at an interest rate of 9% in terms of section
86(4).
31 The investment with ABBA Bank matures and an amount R511 250 with
withdrawn and deposited into the Trust Bank account.
REQUIRED
Journal for March to May 2021.

Trust Client Zacharia (Creditor)
Zacharia Section 86(4) Trust Investment account: ABBA Bank

EXERCISE TWENTY-THREE
The following information relates to the Trust books of Mopani Attorneys:
Balances as at 1 February 2021:
Trust Bank R1 111 000

Trust Clients (Creditors) R1 111 000
Transactions for February 2021:
1 A new client Dlamini deposits R260 000 in Mopani Attorneys Trust Account as
a deposit for future legal work. Dlamini authorises Mopani Attorneys to invest
his deposit in a special interest-bearing savings account with COOL Bank for
2 months. The investment will earn 6.5% interest per annum.
On the same day Mopani Attorneys decides to invest R1 000 000 of the trust
money in a special interest-bearing investment account with ABBA Bank for
1 month at an interest rate of 9% per annum.
28 The investment account with ABBA Bank matures and an amount of

R1 000 000 plus interest is transferred by ABBA Bank to the Mopani Attorneys
Trust Bank account.
31 The investment for Dlamini, in the special interest-bearing savings account with
COOL Bank matures and the capital plus interest is transferred directly to
Mopani Attorneys Trust Bank account.
REQUIRED
Journals for February to March 2021.

Trust Client Dlamini (Creditor)
Section 86(3) Trust Investment account: ABBA Bank
Dlamini Section 86(4) Trust Investment account: COOL Bank

EXERCISE TWENTY-FOUR
The following information relates to the Trust books of Edgewood Attorneys:
Balances as at 1 March 2021:
Trust Bank R1 450 000

Trust Clients (Creditors) R1 450 000
1 Edgewood Attorneys concludes that monies in the Trust Bank will not be
required until June 2021 and so invests R1 250 000 of the trust money in a
special interest-bearing investment account with ABBA Bank for 3 months at an
interest rate of 7% per annum.
8 Receive a deposit of R250 000 from Denzil Colarado for the preparation of
contracts regarding the registration of companies.
9 Colarado informs Edgewood Attorneys that he will not require your services for
another 4 months and instructs you to invest all his trust money in an interest-
bearing investment account with LOST Bank at an interest rate of 6% per
annum. Edgewood Attorneys comply with his instructions immediately.
31 The investment account with ABBA Bank matures and an amount invested plus
interest is transferred by ABBA Bank to the Edgewood Attorneys Trust Bank
account.
Transactions for June 2021:
9 The investment for Dlamini, in the special interest-bearing savings account with
LOST Bank matures and the capital plus interest is transferred directly to
Edgewood Attorneys Trust Bank account.
30 Edgewood Attorneys pays the Fidelity Fund the amount owing via EFT.
REQUIRED
Journals for March to June 2021.
2. Prepare, post to and balance the necessary Trust Ledger accounts.

LEARNING UNIT 4
Correspondent Accounts
The word correspondent refers to a person who corresponds via letter and in
today’s world via email.
In the legal world, attorneys are only allowed to work in a certain jurisdiction. If
an attorney has a client who wishes for work to be completed in another
jurisdiction, the attorney will request or instruct a correspondent in the other
jurisdiction to complete the work on his/her client’s behalf.
We will be referring to the correspondent as an INSTRUCTED attorney who is

instructed to complete business by the INSTRUCTING attorney.
Ensure that you understand the concepts of the one-third allowance and the
collection commission (see your textbook pages 232/3), as well as the
difference between fees charged and disbursements (see your textbook page
234).
The drawing up of the correspondent account statement will not form part of the
syllabus for this module.
We will only be recording transactions in general ledger accounts for this

learning unit.

STEPS TO BE TAKEN IN THE BOOKS OF THE INSTRUCTED ATTORNEY WHEN

“NO TRUST MONIES” IS INVOLVED – i.e. working in BUSINESS BOOKS ONLY
INSTRUCTED ATTORNEY TREATS THE INSTRUCTING ATTORNEY AS THE

CLIENT
STEP ONE
Enter the fees made by instructed attorney
DR Instructing Attorney’s Business Account

CR Fees Account
STEP TWO
Enter the fees (one-third allowance) the instructing attorney is to receive
DR Fees Account
CR Instructing Attorney’s Business Account
STEP THREE
Enter the payment for the disbursements

CR Business Bank Account
NOTE the Instructing Attorney will have to pay the Instructed Attorney the
amount owing which he will recover from his/her client i.e. the person who
requested the legal work to be completed.
STEP FOUR
Enter the payment for amount owing
DR Business Bank Account


EXERCISE TWENTY-FIVE
ABC Attorneys who practise in Johannesburg appoint Cape Town attorneys,

WT Attorneys to register a company for a client, William Williams. The company will
be registered as WW Company (Pty) Ltd.
WT Attorneys sends the following account statement on 30 April 2021.
WT ATTORNEYS
PO BOX 496
CAPE TOWN
8000
ABC Attorneys
PO Box 2333
JOHANNESBURG
2000
R R
Registration of WW Company (Pty) Ltd
Fees 4 360
Correspondence 80
Fees for registration of company 450
Your ⅓ allowance 1 630
Amount due 3 260
REQUIRED
1. Prepare the following ledger accounts in the business books of instructed

attorney WT Attorneys:
Business Bank
Instructing Attorney Business Account
Fees
Include the settlement of the account by the ABC Attorneys.

STEPS TO BE TAKEN IN THE BOOKS OF THE INSTRUCTING ATTORNEY

WHEN “NO TRUST MONIES” IS INVOLVED – i.e. working in BUSINESS BOOKS
ONLY
INSTRUCTING ATTORNEY HAS TWO CLIENTS, NAMELY THE INSTRUCTED

ATTORNEY AND CLIENT REQUESTING THE LEGAL WORK TO BE
COMPLETED
STEP ONE
Enter the fees (and disbursements) the client is responsible for
DR Business Client A (Debtor) Account

CR Instructed Attorney’s Business Account
STEP TWO
DR Instructed Attorney’s Business Account

CR Fees Account
STEP THREE
Enter the payment to the instructed attorney

NOTE the Business Client A (Debtor) now owes the Instructing Attorney
money.
STEP FOUR
Enter the payment for amount owing

CR Business Client A (Debtor) Account

EXERCISE TWENTY-SIX
ABC Attorneys who practise in Johannesburg appoint Cape Town attorneys,

appoints WT Attorneys to register a company for a client, William Williams. The
company will be registered as WW Company (Pty) Ltd.
WT Attorneys sends the following account statement on 30 April 2021.
WT ATTORNEYS
PO BOX 496
CAPE TOWN
8000
ABC Attorneys
PO Box 2333
JOHANNESBURG
2000
R R
Registration of WW Company (Pty) Ltd
Fees 4 360
Correspondence 80
Fees for registration of company 450
Amount due 3 260
REQUIRED
1. Prepare the following ledger accounts in the business books of instructing

attorney ABC Attorneys:
Business Bank
Business Client William Williams (Debtor) Account
Instructed Attorney Business Account
Fees
Include the settlement of the account by the Business Client William Williams
(Debtor).

STEPS TO BE TAKEN IN THE BOOKS OF THE INSTRUCTED ATTORNEY WHEN

“TRUST MONIES” ARE INVOLVED – i.e. working in TRUST AND BUSINESS
BOOKS
STEP ONE
Enter money collected by instructed attorney
DR Trust Bank Account

CR Instructing Attorney’s Trust Account
STEP TWO
Enter the fees made by instructed attorney

CR Fees Account
STEP THREE
DR Fees Account
STEP FOUR
Enter the payment for disbursements by instructed attorney

STEP FIVE
Enter the payment of the client’s money to the instructing attorney
DR Instructing Attorney’s Trust Account

CR Trust Bank Account
STEP SIX
Transfer money from Trust Bank Account to Business Bank Account
DR Instructing Attorney’s Trust Account

and


EXERCISE TWENTY-SEVEN
Golden Attorneys who practise in Durban appoint Sweet Attorneys who practise in
Pietermaritzburg to collect R50 000 for a client, Lucille Grace from Sally Charm.
Sweet Attorneys sends the following account statement on 30 April 2021.
SWEET ATTORNEYS
PO BOX 181
PIETERMARITZBURG
3200
Golden Attorneys
PO Box 2311
DURBAN
4000
R R
L Grace vs S Charm
Collection 50 000
Collection Commission 5 000
Fees for receiving instruction 490
Amount deposited via EFT 46 340
51 830 51 830
REQUIRED
1. Prepare the following ledger accounts in the trust and business books of
instructed attorney Sweet Attorneys:
Trust Bank
Instructing Attorney Trust Account
Business Bank
Instructing Attorney Business Account
Fees

STEPS TO BE TAKEN IN THE BOOKS OF THE INSTRUCTING ATTORNEY

WHEN “TRUST MONIES” ARE INVOLVED – i.e. working in TRUST AND
BUSINESS BOOKS
STEP ONE
Enter money received from the instructed attorney
DR Trust Bank Account

CR Instructed Attorney’s Trust Account
STEP TWO
Enter money the client wished to be recovered by the instructed attorney
DR Instructed Attorney’s Trust Account

CR Trust Client A (Creditor) Account
STEP THREE
Enter the fees levied and disbursements incurred by the instructed attorney
DR Trust Client A (Creditor) Account

CR Instructed Attorney’s Trust Account
STEP FOUR

CR Fees Account
STEP FIVE
Enter the payment due and paid to the client
DR Trust Client A (Creditor) Account

STEP SIX
Transfer money from Trust Bank Account to Business Bank Account
DR Instructed Attorney’s Trust Account

CR Instructed Attorney’s Business Account
and


EXERCISE TWENTY-EIGHT
Golden Attorneys who practise in Durban appoint Sweet Attorneys who practise in
Pietermaritzburg to collect R50 000 for a client, Lucille Grace from Sally Charm.
Sweet Attorneys sends the following account statement on 30 April 2021.
SWEET ATTORNEYS
PO BOX 181
PIETERMARITZBURG
3200
Golden Attorneys
PO Box 2311
DURBAN
4000
R R
L Grace vs S Charm
Collection 50 000
Fees for receiving instruction 490
51 830 51 830
REQUIRED
1. Prepare the following ledger accounts in the trust and business books of
instructing attorney Golden Attorneys:
Trust Bank
Instructed Attorney Trust Account
Trust Client Lucille Grace (Creditor)
Business Bank
Instructed Attorney Business Account
Fees

EXERCISE TWENTY-NINE
Subject Attorneys, practising in Port Elizabeth appoint Active Attorneys who practise
in Durban to collect unpaid maintenance on behalf of Subject Attorneys client,
Nadia Naidoo. The following statement was received from Active Attorneys on
31 March 2021.
ACTIVE ATTORNEYS
R R
Nadia Naidoo vs Neville Naidoo
Collection 20 000
Sheriff Costs 500
Fees – Summons 1 000
Correspondence 300
21 100 21 100
REQUIRED
1. Prepare the necessary ledger accounts in the books of instructing attorney.
2. Prepare the necessary ledger accounts in the books of the instructed attorney.

EXERCISE THIRTY
Your client, Dali Sabango has requested that a corporate lease agreement is drawn
up for his office in Pretoria. You instruct Easter Attorneys, practising in Pretoria to
deal with this matter. The following statement was received from Easter Attorneys on
31 March 2021.
EASTER ATTORNEYS
TO: Abdullah Attorneys in Law
R R
Services Rendered 2 520
Correspondence 45
Preparation of Lease Agreement 1 200
Amount due 2 510
3 765 3 765
REQUIRED
1. Prepare the necessary ledger accounts in the books of instructing attorney,

including the settlement of any monies outstanding.
2. Prepare the necessary ledger accounts in the books of the instructed attorney,

EXERCISE THIRTY-ONE
In early January you instruct your correspondent in Johannesburg, Partner Attorneys

to proceed with various matters. On 29 February 2021 you receive the following
statement of account.
PARTNER ATTORNEYS
TO: Hibiscus Attorneys
Clinton Clayton vs Ali Ameer
Monies collected 5 200
Sheriff costs 75
Fees for instruction 850
Fees for preparing summons 350
Correspondence 80
10% collection commission 520
Vat at 15% 270
Your ⅓ allowance 600
Vat at 15% 90
Clinton Clayton vs Sally September
Sheriff costs 45
Correspondence 65
Vat at 15% 123
Vat at 15% 41
7 954 7 954
REQUIRED



EXERCISE THIRTY-TWO
You have been instructed by a Port Elizabeth firm of attorneys, Blue Attorney in
respect of a collection matter as well as registration of three different companies. You
send the following statement to from Blue Attorneys on 31 March 2021.
Both attorneys are VAT vendors and all amounts, where necessary, include 15%
VAT, unless otherwise stated.
ALL ATTORNEYS IN LAW

TO: Blue Attorneys
R R
Fred Fox vs Cole Cebe
Correspondence 92
Sheriff Fees 46
Registration of 3 (Pty) Limited companies for

Jonathan Pillay
Fees for receiving instructions 1 840
Sheriff costs 138
Correspondence 92
Fees for registration of companies 1 035
Amount due 2 116
7 565 7 565
REQUIRED


EXERCISE THIRTY-THREE
You receive the following statement of account on 31 January 2021, from your
correspondent, Joyful Attorneys, in respect of matters handled on your instructions.
Your mandate from your client, Sashen Saigal, is that you may set off the costs of
divorce against money collected from the debtor, Zaid Zaveri
JOYFUL ATTORNEYS
TO: Constantia Attorneys
R R
S Saigal vs Z Zaveri
Sheriff costs 145
Fees for instruction 1 600 533
Fees for preparing summons 400 134
Correspondence 80 27
10% collection commission 1 240 413
Vat at 15% 498 166
Saigal Divorce
Fees for receiving instructions 600 200
Sheriff costs 45
Advocate costs in divorce case 480
Vat at 15% 90 30
13 903 13 903
REQUIRED
1. Prepare the necessary ledger accounts (including VAT) in the books of

instructing attorney, including the settlement of any monies outstanding.
2. Prepare the necessary ledger accounts (including VAT) in the books of the
instructed attorney, including the settlement of any monies outstanding.

LEARNING UNIT 5
Conveyancing Transactions
An attorney can become a conveyancer if he/she passes the necessary

examination. A conveyancer deals with the legal transfer of immovable
property (e.g. land, residential dwellings, office blocks) from one person to
another.
Ensure that you understand the types of conveyancing attorneys and the
conveyancing process as explained in your textbook (pages 261/2). Ensure
that you understand the following terms relating to the conveyancing process:
Transfer duty
VAT relating to transfer duty
Calculation of transfer duty
Deeds Office
Seller
Purchaser
Offer to purchase
Agreement of Sale
Mortgage Loan
Bank guarantee
Pro-forma invoice
Transfer costs
Estate agent commission
Registration of transfer
Rates clearance
Legal owner
Conveyancing fees
Calculation of fees
Account to
We will only be recording transactions in general ledger accounts for this

learning unit.

STEPS TO BE TAKEN WHEN COMPLETING CONVEYANCING
IN TRUST BOOKS
BEFORE TRANSFER IS REGISTERED
All monies collected from Purchaser – usually deposit and costs as per pro-
forma invoice
DR Trust Bank
CR Purchaser’s Trust Account
Pay costs relating to purchase
DR Purchaser’s Trust Account

CR Trust Bank
AFTER TRANSFER IS REGISTERED
Receive money from Bond Holder
DR Trust Bank account

CR Purchaser’s Trust account
Transfer purchase price from Purchaser’s Trust account to Seller’s Trust

account
DR Purchaser’s Trust account

CR Seller’s Trust account
Pay out money as instructed by seller
Pay Estate Agents fees

DR Seller’s Trust account
CR Trust Bank
Pay Seller’s Bond if required

DR Seller’s Trust account (Ex-Bond holder)
CR Trust Bank
Pay Seller
DR Seller’s Trust account (Seller’s money)
CR Trust Bank

AND IN BUSINESS BOOKS
ONCE TRANSFER IS REGISTERED
Charge Purchaser with Attorney’s fees
DR Purchaser’s Business account

CR Fees account
Pay Attorney – Attorney transfers money due from Purchaser
In transfer journal
DR Purchaser’s Trust account

CR Purchaser’s Business account
And
DR Business Bank account

CR Trust Bank account

EXERCISE THIRTY-FOUR
Jelani Attorneys and Conveyancers are appointed as the conveyancer in the

agreement of purchase and sale of immovable property by the seller, Lethabo Nkosi
and the purchaser, Precious Molefe.
Lethabo Nkosi instructed the conveyancers to draft the agreement of sale which
contains the following provisions:
• The purchase price of R3 100 000 will be paid by the way of a deposit of 10%
of the total purchase price.
• The balance of the purchase price will be covered by a mortgage bond on
behalf of Precious Molefe (the purchaser) and will be paid on the date of
registration of transfer.
• The costs of the registration of transfer should be paid by Precious Molefe (the
purchaser). The estate agent fees should be paid by Lethabo Nkosi (the seller).
Transactions for May 2021
4 Precious Molefe pays the deposit by direct deposit.
5 Precious Molefe requests that the money be invested. You execute the
instruction and invest the deposit money in an investment account with ABBA
Bank.
10 Receive a bank guarantee from DEEP Bank for 90% of the purchase price and
the estate agent submits a pro-forma invoice of R124 000.
14 The conveyancers submit their pro-forma invoice to Precious Molefe for the
costs of transfer of R224 000 which include transfer duty.
15 Precious Molefe pays the pro-forma costs via EFT.
17 The transfer duty in paid to SARS by the conveyancers.
31 The transfer is registered. The investment is withdrawn together with interest of

R2 325.
Jelani Attorneys and Conveyancers accounts to both the seller, Lethabo Nkosi
and the purchaser, Precious Molefe.
REQUIRED
Prepare the necessary ledger accounts in the trust and business books of Jelani
Attorneys and Conveyancers:
Trust Bank
Purchaser Trust account
Seller Trust account
Molefe Section 86(4) trust investment account: ABBA Bank
Fidelity Fund
Business Bank
Purchaser Business account
Fees
EXERCISE THIRTY-FIVE
Top Notch Attorneys and Conveyancers are appointed as the conveyancer in the
agreement of purchase and sale of immovable property by the seller, Jack Jones and
the purchaser, Sally Snowball. Jack Jones instructed the conveyancers to draft the
agreement of sale which contains the following provisions:
of the total purchase price.
behalf of Sally Snowball (the purchaser) and will be paid on the date of
• The costs of the registration of transfer should be paid by Sally Snowball (the
purchaser). The estate agent fees, and rates clearance certificate will be paid
by Jack Jones (the seller).
Transactions for January 2021
3 Sally Snowball pays the deposit via EFT and instructs Top Notch Attorneys and
Conveyancers to invest the deposit money in a 32day interest-bearing
investment account with ABBA Bank. Top Notch Attorneys and Conveyancers
follow the instruction the next day.
12 Receive a bank guarantee from DEEP Bank for 85% of the purchase price.
14 The estate agent submits a pro-forma invoice of 9% of the purchase price.
15 The conveyancers submit their pro-forma invoice to Sally Snowball for the
costs of transfer of R127 500 which include transfer duty.
16 Sally Snowball pays the pro-forma costs via EFT.
20 The conveyancers pay the transfer duties to SARS and R5 000 for the rates
clearance certificate to the local authority.
Transactions for February 2021
5 The transfer is registered. The investment is withdrawn together with interest of

8% for the 32/365 days it was invested. Top Notch Attorneys and
Conveyancers accounts to both the seller, Jack Jones and the purchaser,
Sally Snowball.
REQUIRED
Prepare the necessary ledger accounts in the trust and business books of Top Notch
Attorneys and Conveyancers:
Trust Bank
Purchaser Trust account
Seller Trust account
Snowball Section 86(4) trust investment account: ABBA Bank
Fidelity Fund
Business Bank
Purchaser Business account
Fees

EXERCISE THIRTY-SIX
You work at Redieski Attorneys and Conveyancers who are appointed as the
conveyancer in the agreement of purchase and sale of immovable property by the
seller, Rory Pillay and the purchaser, Tamara Naidoo.
Rory Pillay instructs you to draft the agreement of sale which contains the following
provisions:
• The purchase price of R2 315 000 will be paid by the way of a deposit of
R231 500 of the total purchase price.
behalf of Tamara Naidoo (the purchaser) and will be paid on the date of
• The costs of the registration of transfer should be paid by Tamara Naidoo (the
purchaser). The estate agent fees will be paid by Rory Pillay (the seller).
Transactions for April 2021
1 You receive the deposit from the purchaser by direct deposit.
17 The estate agent submits a pro-forma invoice totalling R173 625 and you
submit a pro-forma invoice to the purchaser for the costs of transfer consisting
of transfer duty and fees of R47 000.
18 You receive the pro-forma costs via EFT.
30 The transfer is registered, and you account to both the seller and the
purchaser.
REQUIRED
Prepare ALL the necessary ledger accounts in the trust and business books of
Redieski Attorneys and Conveyancers.

EXERCISE THIRTY-SEVEN
Dlamini Attorneys and Conveyancers are appointed as the conveyancer in the

agreement of purchase and sale of immovable property by the seller, Berry Loxley and
the purchaser, Linda Madras.
Berry Loxley instructs you to draft the agreement of sale which contains the following
provisions:
of the total purchase price and the balance of the purchase price will be covered
by a mortgage bond on behalf of Linda Madras (the purchaser) to be paid by
ALLO Bank on registration.
• Berry Loxley (the seller) is responsible for estate agent fees and payment of
existing bond of R550 000 while Linda Madras (the purchaser) is responsible
for the bond cost, transfer fees and the conveyancer fees
Transactions for April 2021
2 Linda Madras pays a deposit with a direct deposit. The deposit is much larger
than expected as the purchaser has won the lotto. The deposit amounts to
R1 000 000. Linda Madras gives instruction to transfer this money to a relevant
investment account with ABBA Bank until transfer. Dlamini Attorneys and
Conveyancers oblige.
3 ALLO Bank sends a guarantee for the remainder of the purchase price.
The estate agents forward her pro-forma invoice for R90 000 and the
conveyancer forwards his pro-forma to the purchaser, covering Transfer fees,
R25 500, bond costs, R5 000 and conveyancing fees of R89 000.
15 The purchaser pays the amount owing according to the pro-forma via EFT.
30 The transfer is registered.

The investment matures and an amount of R1 007 000 is received.
The conveyancer accounts to both the seller and the purchaser.
REQUIRED
Prepare ALL the necessary ledger accounts in the trust and business books of
Dlamini Attorneys and Conveyancers.

CONSOLIDATION EXERCISE
EXERCISE THIRTY-EIGHT
Joe Soap starts practising as an attorney on 1 March 2021. The following transactions
took place during March and April 2021 in the books of SOAP ATTORNEYS.
TRANSACTIONS
MARCH 2021
Ms Reddy pays Soap Attorneys R50 000 as a deposit towards her divorce
3
proceedings
Mr Essop pays Soap Attorneys R845 000 via EFT as a deposit and
8 disbursements/fees for a house he is in the process of purchasing which has
a purchase price of R3 200 000 from Ms Collect.
THE BANK guarantees R2 400 000 for Mr Essop’s house.
Mrs Peens pays Soap Attorneys an amount of R1 045 000. She wishes to
10
purchase a house in April 2016.
12 Ms Fraser pays R5 000 for a consultation which will take place on 16 March.
Soap Attorneys sends Mr Essop a proforma invoice for R45 000 which is
15 made up of fees and costs. Soap Attorneys pays the transfer costs R25 000
and R10 000 bond costs on Mr Essop’s behalf.
Mrs Peens instructs Soap Attorneys to invest R1 000 000 of her money in
ABBA Bank as per Section 86(4) of the Legal Practice Act 28 of 2014. The
interest earned on the investment is calculated at 10% per annum.
Mr Selzer wishes you to proceed with collecting R60 000 from Ms Gardner.
As Ms Gardner lives in Cape Town, Soap Attorneys appoint Brush Attorneys
in Cape Town to deal with the matter.
Ms Fraser’s consultation takes place and Soap Attorneys bills her
16
appropriately.
Ms Reddy’s divorce proceedings are complete and Soap Attorneys account
20
to her for R65 000.
31 Transfer necessary monies from Trust Bank to Business Bank.

APRIL 2021
Brush Attorneys sends Soap Attorneys the following statement:
Cash Collected R60 000
Summons Fee R15 000
1 Revenue Stamps R 500
Collection Commission R 500
Your third allowance R 5 000
EFT made R49 000
8 The bond and transfer re Mr Essop’s purchase of a house are registered.
Mrs Reddy paid the amount owing via EFT.
Mrs Peens does not purchase a house and asks for her money and interest
15 due to be paid back to herself. The necessary money is paid directly to the
Fidelity Fund.
30 Transfer necessary monies from Trust Bank to Business Bank.
REQUIRED
Record the transactions above in Soap Attorney’s Trust and Business General
Ledgers. Balance correctly. IGNORE VAT.

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IIE Module Manual ACLA5211

ACCOUNTING FOR LAW

The Independent Institute of Education (Pty) Ltd is registered with the

© The Independent Institute of Education (Pty) Ltd 2021 Page 1 of 72

THE ACCOUNTING CYCLE

Capture of transaction data on source documents DAILY

Analysis of transactions and entry into subsidiary journals DAILY

Posting to General Ledger MONTHLY

Balancing of accounts and extracting a Trial Balance MONTHLY

Preparing Financial Statements

© The Independent Institute of Education (Pty) Ltd 2021 Page 2 of 72

We will be concentrating on transactions which occur in an attorney’s practice, which is

The understanding of accounting terminology is critical to analysing business and trust

An asset is a resource that is owned/controlled by the business. An asset can be converted

Assets can be used for settlement of debt or other obligations.

A liability is any amount of money that is owed by a business to another

© The Independent Institute of Education (Pty) Ltd 2021 Page 3 of 72

Income is the Revenue earned as a result of rendering a service to clients which

A debtor is a business or person that owes another business money, for

© The Independent Institute of Education (Pty) Ltd 2021 Page 4 of 72

THE DIFFERENCE BETWEEN AN ATTORNEY’S BUSINESS BOOKS AND AN

BUSINESS BOOKS TRUST BOOKS

Attorneys are not allowed to use any

© The Independent Institute of Education (Pty) Ltd 2021 Page 5 of 72

DOUBLE ENTRY PRINCIPLE

Each transaction will affect TWO general ledger accounts. When

THE BASIC ACCOUNTING EQUATION

The accounting equation has 3 elements. These three elements are:

Assets (A) Owner’s Equity (OE) Liabilities (L)

These elements can be expressed arithmetically as follows:

Assets = Owners Equity + Liabilities

Every business transaction influences the elements of the accounting equation.

Assets either increase or decrease in value

The following table illustrates the effect of transactions:

ASSETS OWNERS EQUITY LIABILITIES

© The Independent Institute of Education (Pty) Ltd 2021 Page 6 of 72

SOME EXAMPLES OF GENERAL LEDGER ACCOUNTS

NON-CURRENT Drawings Capital NON-CURRENT

Land & Buildings EXPENSES INCOME Long-term Loan

CURRENT ASSETS CURRENT LIABILITIES

Trust Bank Trust Clients (Creditors)

© The Independent Institute of Education (Pty) Ltd 2021 Page 7 of 72

EFFECT OF TRANSACTION ON ACCOUNTING EQUATION -

Read the transaction

Choose TWO accounts affected by transaction

Use one of the 2 accounts and

Decide what type of account it is

Decide how it is being affected – i.e. is it increasing/decreasing in value?

What effect does it have on the equation?

NB REPEAT STEPS THREE TO SIX FOR THE 2ND ACCOUNT

INCOMES make the OWNER

INCOME – EXPENSES = PROFIT

EXPENSES make the OWNER

EXPENSES – INCOME = LOSS

© The Independent Institute of Education (Pty) Ltd 2021 Page 8 of 72

Journals not required in this module

• BUSINESS Cash Receipts Journal

TOP NOTCH ATTORNEYS

• BUSINESS Cash Payments Journal

TOP NOTCH ATTORNEYS8

© The Independent Institute of Education (Pty) Ltd 2021 Page 9 of 72

• BUSINESS Petty Cash Journal for reference only

TOP NOTCH ATTORNEYS