Exam (elaborations)
FAC1503 EXAMLES UPDATES
- Course
- LLB (FAC1503)
- Institution
- University Of South Africa (Unisa)
Exam study book Accounting Principles for Lawyers of Peter Holgate - ISBN: 9781139447157 (THE BEST OR NOTHING)
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Page 1 of 41FAC1503: Example updates and Explanatory Examples
Contents
1. Glossary of terminology used in this teaching document ................................................. 2
3. Acronyms ................................................................................................................................ 4
4. What is the Accounting Cycle? ........................................................................................... 5
5. What are the cash records ................................................................................................. 6
6. What are the requirements for the operation of a trust bank account ....................... 7
7. Preparing the ledger accounts and the trial balance ..................................................... 17
8. Trust Bank Accounts – Section 84 and 86 of the Legal Practice Act, 28 of 2014 ..... 28
, Page 2 of 41
1. Glossary of terminology used in this teaching document (The symbols refer to where
the terms have been used in the document)
1. Account
An account is a part of the accounting system used to classify and summarise the
increases, decreases, and balances of each asset, liability, and equity item.
2. Accounting equation
A mathematical equation on which the framework of accounting is based. The
equation MUST always balance. (BAE)
3. Advocates’ journal
The purpose of the advocates’ journals is to record all items regarding claims for
services rendered by advocates. The advocates’ journal is completed from
statements received from the advocates for services rendered to the clients of the
law firm. For purposes of FAC1503, statements received from an advocate are
recorded in the general journal due to the limited number of transactions.
3. Books of first entry
Books of prime entry are part of the double-entry system. All transactions are first
entered into a book of prime entry. Thereafter the posting is made to the General
Ledger. There are six books of prime entry:
1. Purchases journal
2. Sales journal These four journals are only used if the business
3. Purchases returns journal buys and sells goods.
4. Sales returns journal
5. General journal
6. Cash book (Cash receipts journal and Cash payments journal).
4. Cash records
Cash transactions are recorded in cash books (Cash receipts journal and cash
payments journal)
5. Credit transactions
Credit (non-cash) transactions are the ability of a customer to obtain goods or
services before payment, based on the trust that payment will be made in the future.
Credit transactions are recorded in sundry journals such as fees journal, sheriff’s
journal, advocates journal or the general journal.
6. Cheque
A cheque (a specially printed form) is an order to a bank to pay the sum stated on
the front of the cheque from the drawer's (the writer of the cheque/payer) account, to
the payee (named on the front of the cheque).
7. Contra-account
The opposite account that is debited or credited when applying the double-entry
system.
, Page 3 of 41
8. Credit
A credit is an accounting entry that either increases a liability or equity account or
decreases an asset or expense account.
9. Debit
A debit is an accounting entry that either increases an asset or expense account or
decreases a liability or equity account.
10. Electronic funds transfer (EFT)
An electronic funds transfer is a transaction that takes place over a computerised
network, either among accounts at the same bank or to different accounts at separate
financial institutions.
11. Fees journal
All fees levied for services rendered to clients (either for cash or on credit) are
recorded in the fees journal.
12. General journal
A general journal is used to record unique journal entries that cannot be processed
in a more efficient manner. In the general journal, you must enter the account(s) to
be debited and the account(s) to be credited along with their amounts and a brief
description. Examples of transaction recorded in the general journal are:
• Depreciation
• Other adjusting entries
• Bad debts
• Sale of an asset used in the business
13. Historical cost
Financial statements are prepared using historical cost. This means that assets,
liabilities, income and expenditure is recorded at the price paid/received at the date of
the transaction.
14. Ledger
A ledger is a bookkeeping book/software programme where all the accounts are
recorded.
15. Sheriff’s journal
The claims for services rendered on credit by a sheriff are recorded in the sheriffs’
journal. The journal is prepared from the statement received from the sheriff. For
purposes of FAC1503, statements received from the sheriff are recorded in the
general journal due to the limited transactions...
16. Trial balance (TB)
A trial balance is a bookkeeping worksheet in which the balance of all ledger
accounts is compiled into a column of debit balances and a column of credit balances.
The total of the debit column should be equal to the total of the credit column. The
general purpose of producing a trial balance is to ensure the entries in an entity’s
bookkeeping system are mathematically correct.
, Page 4 of 41
17. Trust creditors’ ledger
The trust creditors’ ledger keep records of transactions with each individual trust
creditor.
18. Trust creditors’ control account
This is one account in the general ledger reflecting the total amount owed to all the
individual trust creditors in the trust creditors’ ledger. The balance of the trust
creditors’ control account must equal the total of the trust creditors’ list, which
represents the amounts owed by the individual creditors obtained from the individual
balances in the trust creditors’ ledger (subsidiary ledger) accounts for each creditor.
19. Trust money
Section 88(1) of the Legal Practice Act, 28 of 2014 states that trust money does not
form part of the assets of the law practitioners’ practice. Thus, the creditors of the
practice cannot claim against this money.
2. Acronyms for folio references
B Balance sheet account (Statement of financial position)
BCRJ Business cash receipts journal
BCPJ Business cash payments journal
CL Clients ledger
FJ Fees journal
GJ General journal
N Nominal account (Statement of profit and loss)
TB Trial balance
TJ Transfer journal
TCL Trust creditors ledger
TCRJ Trust cash receipts journal
TCPJ Trust cash payments journal
3. Acronyms
EFT Electronic funds transfer
LPA Legal Practices Act, (28 of 2014)
LPF Fund Legal Practitioners’ Fidelity Fund
In the double-entry bookkeeping system, every transaction or event affects at least two
different accounts (one account is debited and the other credited). It serves as a kind of error-
detection system: if at any point, the sum of debits does not equal the corresponding sum of
credits, then an error has occurred.
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