Complete and detailed Accounting for Law Students notes. Includes class notes, relevant textbook summaries, and lecturer's test/exam tips and examples. Notes are set out in an organised, structured manner making it easy to understand.
Contents
1 Nature and Function of Accounting and accounting Terms and Concepts.........................................4
Nature and Function of Accounting...................................................................................................4
Need for Financial Information..........................................................................................................4
Theory and Rules of Accounting........................................................................................................4
Types of Entities.................................................................................................................................5
Accounting in Attorney’s Practice......................................................................................................5
Fidelity Fund......................................................................................................................................7
Interest of Investments......................................................................................................................7
Legal Practice Act...............................................................................................................................8
Trust Accounts...................................................................................................................................8
LPC Rules............................................................................................................................................9
Business and Trust Concepts.............................................................................................................9
Auditor’s Report..............................................................................................................................11
Non-Compliance..............................................................................................................................11
Bookkeeping and Role of Attorney..................................................................................................12
2 The Basic Accounting Equation and Accounting System...................................................................13
Double Entry System........................................................................................................................13
3 Value-Added Tax...............................................................................................................................24
Introduction.....................................................................................................................................24
Terminology.....................................................................................................................................24
Supplies...........................................................................................................................................25
Tax Invoices.....................................................................................................................................27
VAT System......................................................................................................................................28
Recording in Ledger Account...........................................................................................................30
Return, Payment and Assessment...................................................................................................34
4 Books of Prime Entry........................................................................................................................35
Introduction.....................................................................................................................................35
Source Documents...........................................................................................................................35
Books of Prime Entry.......................................................................................................................35
General Ledger................................................................................................................................39
Petty Cash Book...............................................................................................................................40
Trust Records...................................................................................................................................41
Books of Prime Entry Continued......................................................................................................43
5 Cash Controls and Bank Reconciliation.............................................................................................47
1
, Introduction.....................................................................................................................................47
Cash Receipts and Cash Payments...................................................................................................47
Bank Statement...............................................................................................................................48
Reconciling Items.............................................................................................................................51
Trust Banking Account.....................................................................................................................52
Reconciliation Procedures...............................................................................................................52
6 Ledger Accounts and Control Accounts............................................................................................59
General Ledger................................................................................................................................59
Subsidiary Ledgers, Control Accounts and Trial Balance..................................................................65
Comprehensive Example.................................................................................................................75
7 Adjustments, Closing Off and Preparing Financial Statements.........................................................77
Introduction.....................................................................................................................................77
Expenses in Arrear (Accrued Expenses)...........................................................................................78
Prepaid Expenses.............................................................................................................................78
Income Received in Advance...........................................................................................................78
Income Receivable...........................................................................................................................79
Stationary on Hand..........................................................................................................................79
Depreciation....................................................................................................................................80
Bad Debts and Doubtful Debts.........................................................................................................81
Financial Position v Financial Performance......................................................................................82
Closing Off........................................................................................................................................83
Trial Balance....................................................................................................................................86
Income Statement...........................................................................................................................86
Balance Sheet..................................................................................................................................87
8 Trust Investments and Transfer Procedures.....................................................................................90
Introduction.....................................................................................................................................90
Trust Investments............................................................................................................................90
Transfer Procedures.........................................................................................................................99
Class Example................................................................................................................................103
9 Correspondents..............................................................................................................................106
Items on the Statement.................................................................................................................106
Accounting Records.......................................................................................................................107
Books of the Instructed Attorney...................................................................................................107
Books of Instructing Attorney........................................................................................................117
More Than One Instruction on Account Statement.......................................................................123
10 Conveyancing Transactions...........................................................................................................124
2
,Property Transfer: Process.............................................................................................................124
Payment of the Purchase Price......................................................................................................124
Transfer Costs................................................................................................................................124
Occupational Rent.........................................................................................................................125
Transfer Duty and VAT...................................................................................................................125
Payment of Purchase Price............................................................................................................126
Class Example................................................................................................................................126
3
, 1 NATURE AND FUNCTION OF ACCOUNTING AND ACCOUNTING TERMS AND CONCEPTS
Nature and Function of Accounting
- Accounting: Language in which financial information is described in monetary terms and
communicated to users
o E.g. transactions of a retailer
- Accounting systems
- Objectives of accounting:
o Profits or losses over a period (financial performance)
o Net worth at certain point (financial position)
- Need for financial information?
- Accounting:
o Process of
Identifying,
Classifying,
Measuring and
Capturing
o Transactions
o In a systematic manner to
o Provide information which:
Can be analysed and interpreted and
Leads to effective decision making
Need for Financial Information
- Users of financial information:
o Investors
o Management
Interested in the financial performance and financial position of the entity
that they manage in order to assess results and to make policy decisions
o Creditors
Want to make sure they’ll get their money back
o Employees
Salary negotiations
Know job is secure
o Government
SARS
o Clients
Want to make sure your supplier is financially sound
Theory and Rules of Accounting
- Consistency, reliability, transparency
4
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