UNIVERSITY OF ZIMBABWE

LLB (HONS) PART III

ACCOUNTING FOR LEGAL PRACTITIONERS (LB301)

MAY 2015

THREE HOURS

Journal entries are not required unless specifically requested. The use of silent calculators is
permitted.

ANSWER ALL QUESTIONS

QUESTION 1

(a) In Mugabe, Mutezo v Law Society of Zimbabwe 1994 (1) ZLR 356 (S), on what
grounds did the Supreme Court come to the conclusion that it could not be said
beyond reasonable doubt that theft or misappropriation of funds had occurred?
(4)
(b) Give justification for the by-law that trust cheques must not be made payable to
“cash” or “bearer” but to the order of a specific payee designated on the cheque.
(4)
(c) When is the interest due to the law society from interest earned by law firms from
investment of trust funds to be paid to the Law Society Compensation Fund?
(2)
(d) When is the annual audit certificate to be submitted to the Law Society by a legal
firm whose financial year ended on 31 December 2014?
(2)
[12]
QUESTION 2

Ebora is a legal practitioner. You are required to make the entries necessary to record in
his books of accounts the following transactions which took place during March 2015.

2 Asha instructs Ebora to collect a debt owing from her customer Xaba. Asha pays
Ebora a deposit of $200.
4 Ebora drafts a letter of demand which he sends to Xaba. He raises a fee of $5 for
drafting the letter.
5 Ebora draws a cheque for $50 petty cash.
7 Banga, another client, instructs Ebora to act for him in the sell of a motor-vehicle to
Yevai. Ebora raises a fee of $120 for drafting the agreement of sale.
8 Yevai pays Ebora $1 500 being the purchase price for the vehicle. On the
instructions of Banga, Ebora transfers the $1 500 into a special investment account
with the POSB.
12 Having received no response from Xaba, Ebora issues summons in the magistrates
court. The messenger of court is paid his fee of $10 from the business account.
27 A cheque for $10 is received from POSB being interest earned on the special
investment.
29 Ebora transfers funds from trust to business to offset Asha’s indebtedness to
herself.
[15]

1
QUESTION 3

The firm’s business cash book reflects a debit balance of $4 900 as at 31 March 2015.
The bank statement as at that date showed a credit balance of $3 450. An examination of
the two records reveals that a cheque for $550 had not yet been presented for payment
and that a deposit of $2 000 which was made on 31 March was not reflected on the bank
statement.

You are required to prepare the bank reconciliation statement as at 31 March 2015.
[7]

QUESTION 4

Shaun and Thrift are equal partners in a law firm. The following balances were extracted
from their books at the end of their financial year end, the 31 December 2014.

$ $
Business creditors 700 Library 1 000
Practising certificate fees 830 Bank overdraft 1 110
Rent 780 Capital Tofara 3 000
Trust current account 430 Capital Thokozile 6 000
Buildings 8 000 Trust savings 220
Fees 4 100 Client debtors 1 280
Employees salaries 500 Trust creditors 1 010
Business savings 400 Petty cash 200
Interest on trust savings 120 Drawings : Thrift 400
Partner’s salary 2 000

You are required to prepare the profit and loss account and the profit and loss
appropriation account together with the balance sheet of the partnership as at 31
December 2014 after taking into account the following adjustments.
.
(a) The bank had debited $20, the cost of a cheque book, to the trust current account.
(b) A payment of $100 had been made to the Deputy Sheriff for service of process on
behalf of a client. Payment had been made out of the trust current account in error.
The client’s business account had been correctly debited.
(c) A client had paid an amount of $240 to be deposited on his behalf pending the
settlement of an offer that he had made to a creditor. The money had been paid
into the business account although the ledger entry was made in the client’s trust
account.
(d) Salaries for December 2014 amounting to $50 had not been paid to the employees.
(e) The partner’s salary had been paid to Shaun who is entitled to $2 500 for the year.
(e) $40 is due to the Law Society Compensation Fund being its share of the interest
earned on the trust savings account.
[20]

QUESTION 5

2
Mayo owes Big Ben Shop, a trader, the sum of $4 000 as at 31 December 2014. On that
date, doubtful of Mayo’s ability to settle the debt, Big Ben Shop create a provision for
doubtful debts in respect of half of the debt ($2 000). During 2015, Mayo makes a
payment of $1 500 and Big Ben Shop satisfy themselves that the balance owing from
Mayo is irrecoverable and must be written off. You are required to make the necessary
entries in the books of accounts to record these transactions.

[8]

QUESTION 6

(a) Give an example of :

(i) an error of principle which a trial balance will not reveal.
(2)
(i) a nominal account. (2)
(ii) a personal account. (2)
(b) Name any three subsidiary books in use in a law firm. (3)
(c) Name any three accounting conventions.
(3)
(d) Distinguish between fixed and current assets giving an example of each.
(3)
(e) At the commencement of business the proprietor brought into the business $700 of
his own money, debtors worth $500 and a tractor valued at $1500 borrowed from
Gerald. Prepare the opening statement which would be entered in the journal.
(3)
[18]

END OF QUESTION PAPER