CLASS EXERCISES: INTRODUCTION

EXERCISE 1

During the course of your practice, you attend to the following transactions:

1. You deposit R100 000 into your practice banking account as a start-up capital.
2. You pay R 3 500 to your landlord as rental for your office space and R 2 500 to
the Legal Practice Council in respect of your membership fees.
3. Tatana pays you R200 000 to be held in trust pending the happening of a future
event. You are authorised to invest the money on his behalf at Kgere Bank.
4. Tatana later instructs you to withdraw R50 000 and pay counsel R30 000.
5. You issue summons in Tatana’s matter debiting R 3 000. You pay the sheriff R
150. You appear in court and Tatana’s matter is finalised. You debit your
finalisation fee of R 5 500.
6. You receive various amounts totalling R1 000 000 from a variety of clients in
trust. You decide to invest R500 000 with ABSA Bank.
7. You withdraw R400 000 of the investment in ABSA Bank. You receive interest
of R4 000 which you pay to the beneficiary.
8. Kokwana pays you R100 000 in cash for future instructions. You are instructed
to purchase quoted shares for R60 000. You pay the stock broker for 2000
shares.
9. Kokwana instructs you to sell the shares. You receive R66 000.

You are required to :

a. Record all the above transactions in your books of account.

b. Extract a list of trust balances as required by the LPC Rules.
c. Indicate whether you have sufficient funds in trust to cover your
trust liabilities.
d. Draw a statement of account to Tatana.

EXERCISE 2

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You receive the following amounts from various clients:

a) Manana pays you R100 000 in cash for the purchase of a property. You are
mandated to invest the money on her behalf. You invest with Nedbank.
b) Vazaya pays you R200 000 cash to be held in trust pending the transfer of
property.
c) Hahani deposits R90 000 in cash to be held in trust pending a compromise
offer.
d) Malume pays R50 000 in cash pending a divorce settlement.
e) Sivara pays you R120 000 for the purchase of a motor vehicle from your client,
Vacini.

1. You invest R200 000 in a Trust investment with FNB.

2. You pay the seller R120 000 for the sale of the car.
3. At the end of the month you withdraw all the trust investment and receive
R104 000 from Nedbank and R209 000 from FNB. You pay the interest to
the beneficiaries.

You are required to record all the transactions in your books of account. Indicate
whether you have sufficient funds in your trust banking account to pay trust creditors.

CORRESPONDENT ACCOUNTS

CLASS EXERCISES

RECEIVING INSTRUCTIONS

EXERCISE 1

You receive instructions from Nyamsoro Attorneys to recover 5000 from Xidyelo, a debtor, on
behalf of their client, Masedi. In the process, you attend to the following transactions:

1. You pay tracing agent 100

2. You issue summons debiting 300
3. You paid sheriff 100
4. The debtor pays 3000

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Please record the above transactions in your books of account, transfer what you are entitled
to from the trust account to the business account and account fully to your instructing attorneys
by preparing a statement of account.

NB: please make provision for VAT at the current rate. The usual 1/3 allowance is applicable
on fees and VAT.

EXERCISE 2

You receive instructions from your correspondent, Mazwi Inc, to recover 20 000 from a debtor
(Tsotsi) on behalf of their client, Moruti. The following transactions occur:

1. You charge instruction fee of R 550.00;

2. You draw a letter of demand debiting R 150.00;
3. Tsotsi pays the R 20 000.00.

Required: record the above transactions in your books of account, transfer what you are
entitled to from the trust account to the business account and account fully to Mazwi Inc by
preparing an accounting statement.

NB: you are a VAT vendor and the usual 1/3 allowance on fees and VAT is applicable.

EXERCISE 3

You are instructed by your correspondent to recover R6 000 from Sibara on behalf of his client
Fororo Ltd. In executing the mandate the following transactions occurred:

1. You charge an instruction fee of R120 (excluding VAT).

2. You pay the tracing agent R150 (ignore VAT implication)
3. You issue summons and charge a fee of R600 (excluding VAT)
4. Sibara pays you R6 000.

In debiting the fees you are entitled to, provision should be made for VAT at 15%. The usual
1/3 allowance on fees is also applicable.

You are required to record the above transactions in your books of account, pay the amount
due to your correspondent and transfer what you are entitled to, to the business account.

GIVING INSTRUCTIONS

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QUESTION 1

You receive the following statement from your correspondent, Loliwe Inc, in a matter
where they acted for you to collect R6 000 from Mr Zahara, for your client Mr Sebata.

STATEMENT OF ACCOUNT

Mr Sebata vs Mr Zahara

To instruction fee 90
Your 1/3 allowance 30
Pay tracing Agent fee 140
Cash By Mr Zahara 6 000
To collection commission 600
Your 1/3 allowance 200
To Cheque herewith 5 400
_________________________

6 230 6 230

_________________________

you are required to:

a. Record all of the above transactions in your books of prime entries and ledger
accounts. Transfer the amounts you are entitled to, to your business banking
account.
b. Account fully to your client by preparing an accounting statement.
c. Ignore VAT.

QUESTION 2

You received the following statement(s) from your correspondent attorneys, Obadia
Inc:

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COMPANY REGISTRATION

Instruction fees R 200.00 R 40. 00

VAT at 15% R 30.00 R 6. 00

Name reservation R 150.00 R 30. 00

VAT at 15% R 22.50 R 4. 50

Final registration R 300.00 R 60. 00

VAT at 15% R 45.00 R 9.00

XIFUMI VS LAZARO

Instruction fees R 300.00 R 60.00

VAT at 15% R 45.00 R 9.00

Summons fees R 400.00 R 80.00

VAT at 15% R 60.00 R 12.00

Paid Sheriff R 120.00

By cash R 20 000.00

Collection fees R 1 500.00 R 300.00

VAT at 15% R 225.00 R 45.00

By EFT R 17 258.00

__________________________

R 20 655.50 R 20 655.50

___________________________

You are required to record the contents of the above statement(s) in your books of
account, transfer what you are entitled to and account fully to your client.

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CONVEYANCING

PRACTICAL EXERCISES:

EXERCISE 1

You are approached by Jantino to assist in the transfer of ownership over immovable property
he sold to Boncisi for R 900 000. In terms of the agreement, the purchaser will pay a deposit
of R 300 000 on date of signature and the balance will be secured by bond from Kgere Bank.
You are authorized to invest the deposit at BNF bank for the benefit of the purchaser. The
purchaser is liable for all costs of transfer. The following transactions occur:

1. On 1 February 2020, the agreement is signed and you receive two EFT payments from
the purchaser for R 300 000 and R 30 000 in respect of the deposit and pro forma
costs respectively;
2. On 2 February 2020, you pay R 12 000 to SARS for transfer duty;
3. On 4 February 2020, the bank advises you that the EFT for R 300 000 was paid but
the one for R 30 000 was reversed;
4. On 5 February 2020, the purchaser pays R 30 000 cash;
5. On 8 February 2020, you receive a bank guarantee from Kgere Bank in respect of the
balance of the purchase price;
6. On 16 February 2020, the bond and transfer are registered.

Required:

Please record the above transactions in your books of account and transfer what you are
entitled to from the trust account to the business account.

Additional note: on calling up the investment you receive an extra amount of R 3 000 as
interest.

EXERCISE 2

You are approached by Cawuke, who recently sold his immovable property to Kantini, for
assistance in the registration of transfer of ownership. Amongst other things, he informs you
that he and the purchaser agreed as follows:

a. the purchase price is R 2 000 000;

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 b. a deposit of R 500 000 to be paid on date of signature and the balance to be secured
by bond from ABSA;
c. the purchaser is liable for all costs of transfer; and
d. you are authorised to invest the deposit for the benefit of the purchaser.

You accept the instructions to act as conveyancer and the following transactions occur:

1. on 02 August, you receive two EFT payments for R 500 000 and R 30 000 in respect
of the deposit and pro forma costs respectively;
2. on 03 August, you pay R 18 000 to SARS in respect of transfer duty;
3. on 05 August, you receive a bank guarantee from ABSA for R 1 200 000;
4. you negotiate with Mapogo, who has R 400 000 in your trust account, to advance a
loan of R 300 000 to Kantini. Mapogo agrees on condition that a second bond is
registered in his favour;
5. On 06 August, you receive the estate agent’s account amounting to R 20 000;
6. On 16 August, the transfer and bonds are registered.

Record the above transactions in your books of account, transfer what you are entitled to from
the trust account to the business account. Ignore VAT.

NB: on closing the investment account you receive an additional amount of R 3 000 as interest
which you pay to the relevant beneficiaries.

BANK RECONCILIATION STATEMENTS AND SUPPLEMENTARY CASH BOOKS

EXERCISE 1: FAVOURABLE BALANCE

Your business cashbook reflected a balance of R 42 000.00 on 31 January 2024. The bank
statement balance was R 72 372.00 on the same date.

On comparison of the two, you discover that:

1. a payment of R 11 490.00 received from a client was incorrectly entered in the

cashbook as R 11 940.00;
2. bank charges in the amount of R 1 500.00 have been debited to the bank account;
3. a stop order payment of R 69 200.00 received from a client has been reversed by the
bank;

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 4. a trust deposit of R 19 112.00 has erroneously been credited to the business account;
5. interest of R 4 100.00 on the favourable bank balance has not been entered in the
cashbook;
6. a payment made by the firm in the amount of R 1 120.00 has been incorrectly entered
in the cashbook as R 1 210.00;
7. a payment received from a client on 31 January 2024 in the cash amount of R 19
200.00 is not reflected on the bank statement;
8. a payment in the amount of R 2 500.00 made by the firm from the trust account appears
on the business bank statement; and
9. an EFT payment in the amount of R 99 920.00 received from a client in respect of your
account has not been entered in the cashbook.

You are required to prepare:

a. the supplementary cashbook for January 2024; and

b. the bank reconciliation statement as at 31 January 2024.

EXERCISE 2: UNFAVOURABLE/OVERDRAWN BALANCE

On 31 December 2023, your business cashbook balance reflects an overdrawn balance of R

500 000.00. On the same date the business bank statement reflects an overdrawn balance of
R 453 800.00. A comparison of the cashbook and bank statement reveals the following:

1. EFT deposit from a client for R 150 000.00 is not recorded in the cashbook;
2. A deposit of R 180 000.00 is incorrectly entered in the cashbook as R 108 000.00;
3. Bank charges of R 5 600.00 are not recorded in the cashbook;
4. Interest of R 16 200.00 on the overdrawn account is not entered in the cashbook;
5. Deposit of R 100 000.00 in respect of client’s fees is only recorded in the cashbook;
and
6. A payment of R 160 000.00 made by the firm is incorrectly recorded as R 106 000.00
in the cashbook.

You are required to prepare:

a. the supplementary cashbook for December 2023; and

b. the bank reconciliation statement as at 31 December 2023.

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EXERCISE

Your bookkeeper presents you with the following extract of private/client trust and business
balances at the end of the month:

Client/Private Trust Balance Business Balance

Popi 5 000 10 000

Cyril 10 000 -

David (10 000) 5 000

Beki 4 000 2 300

Zizi Books CC - (20 000)

You are required to:

1. Indicate transferrable amount from trust to business and vice versa

2. Show balances after transfer
3. Draw journal involved
4. Draw Cashbooks involved