UNIVERSITY OF ZIMBABWE

LLB (HONS) PART III

ACCOUNTING FOR LEGAL PRACTITIONERS (LB301)

JUNE 2011

THREE HOURS

Journal entries are not required unless specifically requested.

The use of silent calculators is permitted.

ANSWER ALL QUESTIONS

QUESTION 1

Sikulu, a legal practitioner keeps a trust current account and a trust savings account at UZ
Bank. The Bank is aware that Sikulu is in financial difficulty and that some of his clients have
lodged complaints with the Law Society. In response, the Law Society has asked Sikulu to
furnish the Secretary with bank certified balances of his accounts. Sikulu then withdraws cash
amounting to $2 000 from the trust savings account. It later transpires that Sikulu was not
entitled to this money and that he is now holding less money than the total of his trust clients’
credit balances.

Briefly discuss the issues that arise. [7]

QUESTION 2

The legal practitioner is holding $10 000 on behalf of his clients Kunda ($4 000) and Lonely
($6 000). On the instructions of Lonely he transfers $5 000 to an investment account with
Modern Finance House. He later decides to open an ordinary trust savings account with POSB
into which he deposits $3 000. At the end of the month, the Modern Finance House credits
interest amounting to $50 to the investment account whilst the POSB credits $20 to the savings
account. The legal practitioner pays the Law Society the $5 due to it being 25% of the interest
earned on the savings account. He also pays Lonely the interest of $50 earned on the
investment account with the Finance House.

You are required to make the necessary entries in the ledger and cash books of the legal
practitioner to record the above transactions . [7]

QUESTION 3

You are a legal practitioner practising in Zvishavane. Your client Xmas instructs you to apply
for a business stand on his behalf whilst Yoweri instructs you to sue Zivanai of Shurugwi for a
debt of $300.

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(a) Xmas pays a deposit of $500.
(b) From your business account you pay to the Council the application fee of $100 and to
the valuer you pay the sum of $15 for preparing a report on the stand.
(c) You instruct your Correspondent in Shurugwi to institute action against Zivanai on
behalf of your client. Later that month you receive the following statement from the
Correspondent to which is attached a cheque for $302.

Collected from Zivanai $310

Summons fees $5
Revenue Stamp $1
Messenger’ fees $2 8
Our cheque attached $302

(d) You raise a fee of $10 for your attendances in the Xmas matter and $15 for your own
attendances in the Zivanai matter.
(e) You transfer funds via the transfer journal from the trust to the business account to
settle clients’ indebtedness to the firm after which you pay Yoweri the balance due to
him.

You are required to enter the above transactions in the books of accounts.
[14]

QUESTION 4

Below is the cash book of Y Ltd together with the bank statement for the month of April 2011.

Cash book
Date Details Amount Bank Date Chq Payee Amount
No
2 Sales 90 1 Balance b/d 320
20 Sales 180 3 008 Tami 50
30 Sales 650 15 009 Shereni 140
25 010 Ntuli 60
___ Balance c/d 350
920 920

Bank statement
Date Details Debits Credits Balance
1 Balance 150 Cr
3 Deposit 90 240 Cr
4 Chq 008 50 190 Cr
16 Chq 005 470 280 Dr
Interest 10 270 Dr
21 Deposit 180 90 Dr
27 Chq 010 60 150 Dr
30 Commission 30 180 Dr

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You are required to update the cash book (starting with the balance brought down of $350) and
to thereafter prepare a bank reconciliation statement as at the end of April.
[8]
QUESTION 5

The following balances appeared in the books of Dhala and Eva, legal practitioners, who are
equal partners, on 31 December 2010, their financial year end.

Dr Cr
$ $
Capital : Dhala 8 000
Eva 4 000
Buildings 11 000
Library 3 000
Client debtors 1 970
Provision for bad and doubtful debts 200
Partner’s salary : Dhala 700
Rent 1 100
Drawings : Eva 300
Business current account 720
Trust current account 4 920
Trust savings account 2 000
Business creditors 1 000
Fees 4 000
Client’s trust accounts 7 070
______ ______
24 990 24 990
______ ______

YOU ARE REQUIRED to prepare the profit and loss and profit and loss appropriation
accounts and the balance sheet for the year after taking into account the following matters

(a) Included in the provision for bad and doubtful debts is a debt amounting to $50 which
has been confirmed irrecoverable and is to be written off.
(b) An amount of $100 is due as rent for December 2010.
(c) An amount of $70 had been debited to a client’s business account instead of to his trust
account in error.
(d) A client had paid an amount of $80 to be kept on his behalf pending the settlement of
an offer that he had made in an action being brought against him. The money had been
paid into the Business Current Account although the ledger entry was made in the
client’s trust account.
[18]

QUESTION 6

Anna and Busi are partners sharing profits and losses in the ratio of 1:2. It is agreed to admit
Chari and Dingi into partners. The four partners are to share profits and losses equally. The
goodwill of the business is valued at $12 000. How much is each one of the old partners
entitled to as payment for goodwill from the new partners? [4]

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QUESTION 7

Explain how the bookkeeper would enter each of the following transactions in the books of
account.

(a) The purchase of a computer programme to be used for the preparation of trust accounts.
(b) Payment to the messenger of court of the sum of $400 being the amount due to him for
the month for service of process on behalf of various clients as reflected in the
Messenger of Court’s Book.
(c) The receipt by a legal practitioner of $600 from a client, X, being payment for fees
previously raised by the legal practitioner for services rendered.
(d) Payment to a client of the sum of $500 being collections made from debtors on his
behalf.
(e) Revenue stamps worth $40 are affixed to process issued on behalf a client.
[10]

QUESTION 8

The motor vehicles of the firm are depreciated at 10% per annum using the diminishing
balance method. The books reflect that the motor vehicles cost $50 000 and that their
accumulated depreciation is $4 000. Included in the motor vehicles is an Isuzu which cost
$5 000 and against which depreciation has been provided for in the sum of $950. The Isuzu is
involved in an accident and is a complete write off and only $400 is recovered from the
insurers. You are required to make the necessary ledger entries in the motor vehicles account,
the provision for depreciation account and the disposal of motor vehicle account.
[5]

QUESTION 9

At the commencement of business the partners, A and B brought into the business the
following assets and liabilities. A: $200 of his own money, debtors worth $500 and a lorry
valued at $1000 borrowed from Crocodile Motors. B: $350 of his own money.
Prepare the opening statement which would be entered in the journal at the commencement of
the partnership.
[4]

END OF QUESTION PAPER