Accounts

Course Reference Materials

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 (i)

Leo Cussen Centre for Law

Practical Training Course

Accounts

Contents

Course Aims and Summary ................................................................................... (iii)

Program ................................................................................................................ (v)
Resources ............................................................................................................. (vii)

Module 1: Trust Accounts

Trust Account - Objectives .................................................................................... 1.1.0
General Introduction .............................................................................................. 1.2.1
Trust Accounts - Introduction ................................................................................. 1.3.1
Major Legislative Provisions................................................................................... 1.4.1
Trust Money and the Requirement to Bank............................................................ 1.5.1
The Flow of Money through the Trust Account: The “U-Curve” ............................. 1.6.1
Trust Account Receipt Book .................................................................................. 1.7.1
Trust Account Bank Pay In Book ........................................................................... 1.8.1
Trust Account Cash Receipts Book ....................................................................... 1.9.1
Client Trust Ledger Card ....................................................................................... 1.10.1
Examination of Example Trust Ledger Card .......................................................... 1.11.1
Trust Account Cash Payments Book ..................................................................... 1.12.1
Trust Account Cheque Book .................................................................................. 1.13.1
Reconciliations ..................................................................................................... 1.14.1
Transit Entries (The Short Cut) .............................................................................. 1.15.1
Transfer Journal ................................................................................................ 1.16.1
Specific Trust Entries ............................................................................................. 1.17.1
Stale Cheques ............................................................................................ 1.17.1
Cancelled Cheques .................................................................................... 1.17.1
Stop Payment ............................................................................................. 1.17.4
Unclaimed moneys – Dormant Balances .................................................... 1.17.4
Statutory Deposit ................................................................................................... 1.18.1
The Register of Investments .................................................................................. 1.19.1
The Register of Interests ....................................................................................... 1.20.1
Register of Powers and Estates ............................................................................. 1.21.1
Controlled Money – Division 4 – 3.3 LPR 2005 ...................................................... 1.22.1
Deeds Register & Wills Register ............................................................................ 1.23.1
Reporting Obligations ............................................................................................ 1.24.1
External Examiner ................................................................................................. 1.25.1
Winding up the Practice of a Deceased Practitioner .............................................. 1.26.1

Module 2: Office Accounts and Practice Management

Office Accounts and Practice Management - Objectives ....................................... 2.1.0
Office Accounts ..................................................................................................... 2.2.1
Office Account Receipts/Payments Cash Book ..................................................... 2.3.1
Office Account Reconciliation ................................................................................ 2.4.1
Office Account Client Ledger Card ........................................................................ 2.5.1

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Module 3: Trust Statements Rendering Bills and Taking Costs

Trust Statements Rendering Bills and Taking Costs - Objectives .......................... 3.1.0
Client Trust Account Statements ........................................................................... 3.2.1
Payment of Costs and Disbursements Out of Trust ............................................... 3.3.1
The Format of Bills of Costs .................................................................................. 3.4.1

Module 4: General Notes on Banking, TFN's and Related Matters

General Notes on Banking, TFN’s and Related Matters - Objectives ..................... 4.1.0
General Notes on Banking ..................................................................................... 4.2.1
Bank Cheques ....................................................................................................... 4.3.1
Tax File Numbers .................................................................................................. 4.4.1
GST ....................................................................................................................... 4.5.1
Significant Cash Transaction Reporting ................................................................. 4.6.1
What is NOT Trust Money ..................................................................................... 4.7.1

Module 5: Exercises and Stationery (on the Online Learning Environment for
online Trainees)
Instructions ............................................................................................................ 5.0.1
Exercise Assessment sign off sheet ...................................................................... 5.0.2

Exercise 1: What are Trust Moneys? .............................................................. 5.1.1

Answer 1: What are Trust Moneys? (p/accounts)

Exercise 2: Requirement to Bank and Deficiencies ......................................... 5.2.1

Answer 2: Requirement to Bank and Deficiencies (p/accounts)

Exercise 3: Receipts of Trust Money ............................................................... 5.3.1

Answer 3: Receipts of Trust Money (p/accounts)

Exercise 4: Payment of Trust Moneys ............................................................. 5.4.1

Answer 4: Payment of Trust Moneys (p/accounts)

Exercise 5: Transfer Journal ........................................................................... 5.5.1

Answer 5: Transfer Journal (p/accounts)

Exercise 6: Trust Account Reconciliation ........................................................ 5.6.1

Answer 6: Trust Account Reconciliation (p/accounts)
Additional Notes..................................................................................................... 5.6.5

Exercise 7: The Registers ............................................................................... 5.7.1

Answer 7: The Registers (p/accounts)

Exercise 8: Reporting Obligations and Statutory Deposit ................................ 5.8.1

Answer 8: Reporting Obligations and Statutory Deposit (p/accounts)

Exercise 9: The Records of the Trust Account ................................................ 5.9.1

Answer 9: The Records of The Trust Account (p/accounts)

Stationery for use in topic work exercises .............................................................. 5.10.1

NOTE 1: All answers are on the p drive so you can refer to them after you have completed
each exercise and (for onsite Trainees) seen a consultant as required.

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 (iii)

Leo Cussen Centre for Law

Practical Training Course

Accounts

Course Aims and Course Summary

Objectives
As stated in each Part of these CRMs.

Skills Practised

1. The conduct of trust and office accounts.

2. The conduct of banking and payment of bills generally.

3. Office financial management.

Accounts must be maintained in accordance with the Act and Rules for each current matter
file up to the scheduled final audit.

Assessment
Your performance in the topic is assessed in three ways:

1. By self-assessment of your performance in the topic work exercises carried out as you
work through these CRMs together with feedback provided.

2. On the basis of your overall performance in the maintenance and running of all the
trust and office books of account as they relate to the current matters program.

3. Your audit by the team of External Examiners in the final audit. You must be assessed
satisfactory to obtain your certificate of satisfactory completion in the practical training
course.

DO NOT COOK THE BOOKS ! ! !

ASK FOR HELP ! ! !

See Ann Beckingham (2nd floor) or

Val Dowell (in the bank on 3rd floor)

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Leo Cussen Centre for Law

Practical Training Course

Accounts

How this topic complies with the National APLEC/LACC

Competency Standards for Entry Level Lawyers

An entry level lawyer should have a sound general knowledge of the significance of, and the
principles governing, trust and general accounting in legal practice and sufficient knowledge,
skills and values to maintain trust and general account records according to law and good
practice, to the extent usually permitted and expected of an employed solicitor.

Performance Criteria
The lawyer has competently:

1. Receiving money
• Dealt with money received from or on behalf of a client, as required by law and
good practice.
• Where the law and good practice requires money to be deposited in a trust
account, controlled or general account, recorded the deposit as required by law
and good practice.
• Issued any receipt required by law and good practice.

2. Making outlays
• Made any outlay from the correct account, according to law and good practice.
• Recorded the outlay as required by law and good practice.

3. Rendering costs
• Calculated the costs in accordance with law, good practice and any agreement
between the lawyer and client.
• Added to the bill all outlays made by the firm for which the client is responsible.
• Accounted to the client for any money received from the client on account of
costs and outlays, as required by law and good practice.
• Drafted the bill and delivered it in accordance with law and good practice.

4. Maintaining Trust account

Maintained any trust account in accordance with specific statutory requirements,
including any requirements relating to common fund deposits and auditing.

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Program – Onsite

The Accounts course is conducted as shown in the Timetable.

The course is designed to enable you to work through the CRMs at your own pace over the
days timetabled for Accounts Instruction. The Topic issues the CRMs on Day 2 of the
Course, so you can make an early start. Read through the CRMs and complete the
exercises as you go. DO NOT PROCEED FURTHER until you have understood the area of
study and where appropriate have completed and checked your answers with the
Consultants and against the answers on the p/drive.

The "suggested answers" are to enable you to self-assess your performance. Use them
correctly and you will be able to accurately gauge your performance and progress. They
are there to assist you, not relieve you of your study! Access answers on the p: drive.

The consultants are available to assist with the explanation of any area with which you are
experiencing difficulty. Have one of the consultants scan your answers and date and initial
your Exercise Assessment signoff sheet to complete this topic.

The timetable for the topic in onsite mode is as follows:

Day 2 of the PTC Course

2.00 – 3.00 Lecture Theatre Introduction to Accounts, setting up bank

accounts

Day 7 as timetabled

9.30 – 4.00 Work Stations Working through Accounts CRMs

and exercises (with consultants available)

Day 8 as timetabled

9.30 – 4.00 Work Stations Working through

Accounts CRMs and exercises (with
consultants available)
Note

You must hand in your Completed Exercise Assessment signoff sheet signed by the
Consultants (see page 5.0.2) at the Registry by 5:00pm on Day 8.

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Program – Online

Please refer to the Accounts Topic on the Learning Environment and to the Timetable for the
First Intensive handed out on Day 1.

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Resources

Legal Profession Act 2004 (LPA) and Legal Profession Regulations 2005 (LPR)

These are available on www.legislation.vic.gov.au

The Law Institute of Victoria

Website – www.liv.asn.au/regulation/trust/

The Legal Services Board

Website www.lsb.vic.gov.au/trustacconts.htm

Note

You are required to view the Act and the Rules online. The sections and regulations
are not all reproduced in these CRMs.

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 1.0.1

Module

1
Trust Accounts

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Trust Accounts Objectives

On completing this part you should be able to:

• list the main requirements of the legislation and rules governing the keeping of trust
accounts by law practices;
• list the trust books and records that must be kept by law practices;
• make the necessary entries in the trust books and records required to record proper
handling of money received by you as a law practice;
• conduct your trust account in the CM program of the Course in a proper manner.

By the end of this course in Accounts you should also have met the APLEC/LACC National
Competency Standard for Entry Level Lawyers in Trust and Office Accounting. The
competency standard is as follows:

Trust and office Accounting

An entry level lawyer should have a sound general knowledge of the significance of, and the
principles governing, trust and general accounting in legal practice and sufficient knowledge,
skills and values to maintain trust and general account records according to law and good
practice, to the extent usually permitted and expected of an employed solicitor.

Performance Criteria
The lawyer has competently:
1. Receiving money
• dealt with money received from or on behalf of a client, as required by law and
good practice.
• where the law and good practice requires money to be deposited in a trust
account, controlled or general account, recorded the deposit as required by law
and good practice.
• issued any receipt required by law and good practice.
2. Making outlays
• made any outlay from the correct account, according to law and good practice.
• recorded the outlay as required by law and good practice.
3. Rendering costs
• calculated the costs in accordance with law, good practice and any agreement
between the lawyer and client.
• added to the bill all outlays made by the firm for which the client is responsible.
• accounted to the client for any money received from the client on account of costs
and outlays, as required by law and good practice.
• drafted the bill and delivered it in accordance with law and good practice.
4. Maintaining Trust account
• maintained any trust account in accordance with specific statutory requirements,
including any requirements relating to common fund deposits and auditing.

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Leo Cussen Centre for Law

Practical Training Course

Accounts

General Introduction

Law practices must keep records of what they do (see Chart page 1.2.3). A major part of
that is records about client’s money.

Law practices are required by law to keep trust accounts if they handle any "trust money" for
clients. These trust accounts are subject to outside audit by an External Examiner retained
by you for that purpose and may also be audited by inspectors appointed by the Legal
Services Board. A proportion of the moneys retained in the trust account must be deposited
with the Legal Services Board when the average balance in the trust account is over a
certain amount. This is the “statutory deposit” (see 1.18.1). Failure to comply with the trust
accounting requirements may result in cancellation of your practising certificate and
substantial fines. In some cases, it is also a criminal offence punishable by imprisonment.

Law practices are also required to keep office accounts. Law practices conduct business for
profit; as such, the normal business records must be kept for commercial and taxation
reasons. There is little control over how you maintain your office accounts. However, they
must obviously be intelligible to the Taxation Department and to the Legal Services Board,
should it wish to check those accounts in conjunction with a trust audit to see whether (for
example) costs have been taken improperly.

In general, law practitioners do not understand and are not comfortable with accounts. So
this course is written at a basic level to cater for those of us who find Accounting baffling.

Your materials consist of these notes (the CRMs). In addition, separate stationery has been
given to you to enable you to maintain your trust and office accounts in the Current Matters
program during the course. Further stationery can be downloaded from the Leo System.

The CRMs are divided into 5 sections:

1. Trust Accounts
2. Office Accounts and Practice Management.
3. Trust Account Statements; Rendering your bill and taking costs.
4. Principles of Banking, Tax File Numbers and related matters.
5. Required Topic work exercises and stationery for those exercises.

Proceed through the CRMs and assess your understanding of each section by undertaking
the topic work exercises. As each exercise is completed, answer sheets are available on the
p/drive (onsite) or the Learning Environment (online). Check your answers and if trouble
arises, see a consultant or Ann Beckingham. Onsite Trainees have the consultants date and
initial your Exercise Assessment signoff sheet as you go. This must be completed and
handed in to the Registry by 5.00 p.m. on the last day scheduled for instruction in the
Accounts Topic.

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 1.2.2

Cardinal Rules

* Keep your accounts regularly, and make all entries and postings promptly.

* If your accounts don't "come out", DO NOT cobble them - you will get into more
trouble than ever.

* If you do strike trouble - come and get help sooner rather than later.

* DO NOT erase a mistake Cross out the mistake so that it is still legible, then re-
enter the correct figures, and initial the alteration.

* DO NOT use pencil.

* Too much information is always better than too little.

* Issue receipts in chronological order.

* Ensure your trust account records match the relevant file.

* Do not take costs before you are entitled to them (finished the file: rendered a
proper bill and trust statement etc).

* Do not confuse your office cheque/receipt books with your trust cheque/receipt
books.

Final words of encouragement – Learn to love accounts. Figures cannot lie, they
are inanimate. It is the way in which they are arranged which causes the problems.
If you approach the task in a conscientious way, you will find that it all fits into
place.

Computerised Accounting System

During this course your books of Accounts will be maintained under a manual system,
however Division 2 of Module 3.3 LPR prescribes how computerised accounting systems
need to be kept.

You can save the relevant records on your computer and complete them there.

You MUST print the records out at the end of each month and keep them in hard copy.

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Overview of records in a
Legal practice

Client file
About the client About being profitable Opening sheet
& matters Check List
Billing Running sheet
Client management Instructions sheet
system Time sheets Copies of everything
Correspondence file
Client Index Time Spent Chronological
Proper files notes
File register copies of letters sent
Letters received
Conflicts Register Copies of documents (Transfers etc)
Drafts (marked as such)
Limitations of actions Bills
Book Document file
Litigation docs filed & served
Litigation docs served on you
Agreements (contracts of sale: vendors
statements etc)
Original docs (what should go in Deeds?)
Evidence File
Separate plastic sleeve? In Deeds??
Closing sheet

File Number
Links to everything

About the legal About the clients’ money Clients’ documents

practice money Deeds register - originals
Wills
Office Account Trust account Leases
Receipts Transfers of leas
Cash receipts book Certificates of title etc
Ledger cards
Cash Payments Book
Cheque Book
Reconciliations –
monthly
Transit records

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Trust Accounts - Introduction

Legal practitioners are trustees for their clients in respect of money and other valuable
securities which they handle as law practices on their clients’ behalf.

As trustees, legal practitioners are accountable for what happens to money held by them. In
order to be able to give an account of the moneys held, law practices must keep records of
that money. This is the purpose of trust accounts - to keep records of money held by law
practices on behalf of a client so that an account can be given of that money to the client at
any time and to anyone with the right to inspect.

Legislation requires law practices to maintain trust accounts as a condition of being

permitted to practice. The main legislation is:

Legal Profession Act 2004 * LPA

Legal Profession Regulations 2005 * LPR

Most law practices employ an accountant or bookkeeper to maintain the trust accounts.
However, the responsibility of accounting to the client and of complying with the legislative
requirements remains with the law practice; and in particular with each individual legal
practitioner as a condition of being permitted to practice.

YOU MUST, therefore:

• know what the legislative requirements are;
• comply with them by ensuring the proper operation of your trust account.

Failure to maintain proper records or to handle trust money correctly can lead to cancellation
of your practising certificate.

It is an offence to have a deficiency in your trust account, or to fail to deliver or pay trust
money without reasonable excuse. Section 3.3.21 (1) LPA

Penalty: maximum 15 years imprisonment.

Deficiency: is defined to include “non-inclusion or exclusion of ….. an amount that is

required to be included in the account”. Section 3.3.21 (3)

There is an obligation to report irregularities to the Legal Practice Board. Section 3.3.22 LPA

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Major Legislative Provisions

The major legislative provisions are contained in:

• Module 3.3 of the Legal Profession Act 2004 (LPA) sections 3.3.1 to 3.3.66; and
• Legal Profession Regulations 2005 (LPR) Rules 3.3.1 to 3.3.51.

Please locate these sections of the Act and the relevant Rules and read them.

Access the Act and Rules at www.legislation.vic.gov.au.

DO NOT PRINT THE LEGISLATION OUT, but note the requirements in conjunction with the
following summary and the more detailed notes that follow.

Module 3.3 Legal Profession Act 2004

Sections Main purpose CRMS Required Comment

page record
3.3.1 States purpose of Module 3.3: Module 1 Refer LPA Overall purpose –
ensure trust money is held 3.3.2 definition protects interests
efficiently and so as to protect of trust records of people to
those to whom it belongs. whom the money
belongs. Aims for
national
consistency.
3.3.2 Definitions : Note Page Also refer to
Banks that are ADIs 1.4.7 Legal Services
Trust money includes Board website.
- Controlled money
- Transit Money
- Trust records listed
3.3.3 Exemption – money involved in An attempt to
financial services or investments limit claims
UNLESS against the
Primarily for and in ordinary course Fidelity Fund.
of practice.
3.3.11 Maintenance of general trust Module 1 If you receive
account: only transit
If you receive trust money, you money or
must maintain a trust account. controlled money
– you don’t need
to open a general
trust account.

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 1.4.2
Sections Main purpose CRMS Required Comment
page record
3.3.12 Notify details of your trust account Note penalty for
(and any subsequent changes) to failure to notify.
the Legal Services Board within 14
days.
3.3.13 Any trust money must be deposited 1.7.1 Trust receipt Bank trust money
into general trust as soon as as soon as
1.9.1 Trust cash
practicable possible!
receipts book
UNLESS it is transit money or Cash must
controlled money or subject to a 1.10.1 Client ledger always be banked
specific power. 1.8.1 Bank pay in in trust.
Keep written directions as to book
money.
3.3.14 Trust money must be held for the 1.13.1 Trust cheque It’s the client’s
person on whose behalf it is book money!!
received; 1.12.1 Trust cash
Must be paid out in accordance payments
with that person’s direction. book
You must account for trust money 1.10.1 Client trust
as required by the regulations. ledger
3.3.14A Can only be paid out by cheque or
EFT.
3.3.15 Controlled money (received with a 1.22.1 Controlled Designed for
written direction to deposit in a money register large sums of
separate exclusive account) must money that
be deposited asap in accordance Controlled should be earning
with the direction. money interest EG:
Pay out only on written direction. account money brought in
statement from
administration of
deceased estate.
3.3.16 Transit money (money received 1.15.1 Transit register Keep careful
with instructions to hand to third (optional) records on the
person/entity without being banked Maintain relevant file.
first). details on the Recommend
Handle in accordance with the relevant file. keep Transit
direction and account as required. Register and
photocopy
cheques.
3.3.17 Trust money subject to specific
powers: deal according to power.
3.3.17A Cash must be deposited to trust.
3.3.18 Protection of Trust money.
Trust money cannot be used to pay
debts of the law practice.
3.3.19 Trust accounts must only hold trust
money (no intermixing).
3.3.20 Legal practice can exercise a lien Module 3 Bill of costs Observe the
over trust money for reasonable regulations re
costs. Trust account using trust money
Can use trust money to pay costs if statement to pay costs.
regulations complied with. Notice of rights Reg 3.3.34

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 1.4.3
Sections Main purpose CRMS Required Comment
page record
3.3.21 Deficiency (and failure to pay or 1.5.1 You are
deliver) is a crime punishable by responsible for
max 15 years imprisonment. what your staff
do.
3.3.22 Duty to report irregularities (or 1.5.1
suspected irregularities) in trust
account asap.
3.3.25 Trust records must be in Your trust
permanent form; in accordance account records
with the regulations; and must always be
Show the true position of the trust accurate and up
account at all times. to date.
Keep for 7 years.
3.3.26 Do not knowingly keep trust money
under a false name.
3.3.27 Inform Legal Services Board of
Trust balances when requested.
3.3.52 Trust accounts must be audited by
your approved external examiner
each year.
3.3.54 External audit Report goes to the 1.25.1 Annual
Legal Services Board each year. statements or
Stat Dec
3.3.62 – Statutory Deposit requirements: 1.18.1 The Bank reports
3.3.66 deposit required amount with Legal to the Board.
Services Board; recalculate
quarterly.

Module 3.3 Legal Profession Regulations 2005

Regulation Main purpose CRMS Required comment

page record
3.3.1 This part applies to trust money.
3.3.2 Definitions
Division 2 Requirements for keeping trust
3.3.3 – account records on a computer
3.3.7 based system: Includes -
A paper copy of the records
must be printed monthly
Keep a chronological record of
amendments or deletions of info
Keep backups
3.3.8 You must open a trust account with 1.5.1
an approved ADI if you receive
trust money.
Include the parties name AND law
practice trust a/c in the name of
the account.
3.3.9 Make out a receipt (in duplicate) for 1.7.1 Trust receipt You need to
trust money received with required issue receipts in
particulars. strict
Give original to payer if requested. chronological
Issue receipts in consecutive order as and
sequence and consecutively when trust
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 1.4.4
Regulation Main purpose CRMS Required comment
page record
numbered. money is
Keep the original of any cancelled received.
receipt.
3.3.10 Receipts for money directly 1.7.1 Relates to EFT
credited to the trust account. deposits.
3.3.11 Keep trust records for 7 years.
3.3.12 Withdrawals from trust accounts 1.13.1 Trust cheque
must be by way of cheque made book
out to a specific person (not cash
or bearer) and crossed NOT
NEGOTIABLE.
Include name of the law firm and
law practice trust a/c.
Signed by an authorised principal
or as per regulations
Note records to be made of issue
of cheque.
3.3.13 Payment by EFT.
3.3.14 & Keep trust account cash receipts 1.9.1 Trust Account
3.3.15 book with details as specified. Cash receipts
book
3.3.14 & Keep trust account cash payments 1.12.1 Trust Account
3.3.3.3.16 book with details as specified. Cash payment
book
3.3.17 Keep a trust account ledger with 1.10.1 Trust ledger
separate ledger accounts for each cards
matter for each client with full
details as required.
Record transactions in the order in
which they occur.
Record details on the ledger card
within 5 working days.
Record the balance in the ledger
after each transaction.

3.3.17(7) Records to be kept when 1.16.1 Trust transfer Each entry is

And 3.3.18 transferring money between trust journal identified by a
ledgers. specific number.
Transfers must be authorised and
required particulars given.
3.3.19 Trust accounts must be reconciled 1.14.1 Reconciliation
within 15 working days of the end statement
of each month.
3.3.20 A trust ledger in the name of the No “Buffer”
firm may be kept but ONLY for the accounts
purpose of collecting and paying
costs out of trust.
Divn 4 Name of a controlled money 1.22.1 CMA receipt Required if you
3.3.22 to account must include CMa/c and book hold controlled
3.3.26 an identifying name. money.
Keep a separate receipt book and
issue receipts with required details.

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Regulation Main purpose CRMS Required comment
page record
Written directions re controlled Register of See CM
money must be kept for 7 years. Controlled stationery cash
Withdrawal of controlled money money book.
only on written direction.
Keep a Register of Controlled
money with required particulars. List of controlled See CM
Keep a monthly list of controlled money accounts stationery cash
money accounts. book
reconciliation.

3.3.27 Record brief particulars sufficient to 1.15.1 Details on file Recommend

identify the relevant transaction Transit Register;
and purpose for which transit photocopy of
money is received. cheques; full
details on file.
3.3.28 You must provide trust account Module Trust account
statements to those for whom you 3 statement
hold trust money (other than
transit) with the required
particulars.
Statement to be provided asap
after completion of the matter/
reasonable request/ 30 June each
year.
3.3.30 Maintain a register of investments 1.19.1 Register of For example:
for trust money received primarily Investments money received
in the course of legal practice for when acting on
investment with the required the
details. administration of
BUT not if recorded elsewhere by a deceased
another regulation (say controlled estate.
money).
3.3.31 Keep record of trust money where
the law practice is given a specific
power to deal with that money:
record of all dealings and
supporting information.
3.3.32 Keep Register of Powers of 1.21.1 Register of
Attorney where law firm is sole Powers and
Attorney; Estates
and record of estates where law
firm is sole Executor/Administrator.

3.3.34 Law Firm may withdraw money Module Bill of costs

from trust for costs where: 3
* it is in accordance with a costs Notice of rights
agreement: or
* in accordance with instructions Notice of
authorising the withdrawal; or withdrawal
* it is to reimburse the practice for
money paid by it on behalf of the
client

AND

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Regulation Main purpose CRMS Required comment
page record

* before withdrawing, the practice

sends a request for the
payment/withdrawal OR written
notice of withdrawal

Law firm may withdraw money from

trust for costs
* If the practice has rendered a bill
for the costs

AND

* person has not objected to the bill

within 7 days of receipt

OR

* person has objected but not

applied for a review within 60 days,

OR

* the money is otherwise legally

payable
3.3.36 Keep trust records for 7 years after
3.3.37 the finalisation of the matter.
3.3.38 Legal Services Board can require
law practices to give details of trust
money/including transit, and
controlled money.
Divn 7 Law practice must appoint external 1.25.1
3.3.39 to examiner to audit the trust account
3.3.45 each year.
Requirements for appointment.
Must notify details of appointment.
Cannot terminate without showing
cause.
Appointment of new examiner.
Duties of an external examiner:
check trust account properly kept
and make test examinations of
3.3.47 records.

3.3.48 Give report and certificate.

3.3.46 Law Practice must provide annual 1.24.1 Annual
Statement of Trust money to the statement of
Legal Services Board and copy to Trust Money
external examiner.
3.3.49 Law Practice must give stat dec if 1.24.1 Form A1
trust money not held.
3.3.50 Law practice must give stat dec on Form B1
ceasing to hold trust money.

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Approved ADIs
The following banks are approved by the Legal Services Board as ADIs (authorised deposit
taking institutions) for the purpose of section 3.3.11 LPA and have entered the required
arrangement with the Legal Services Board under section 3.3.59:

ANZ Bank
Bank of Melbourne/St George Bank
Bank of Queensland Ltd
Westpac Bank
Bendigo Bank (and related Community Banks)
Macquarie Bank
Commonwealth Bank
National Australia Bank
Bankwest

Visit the Legal Services Board website at www.lsb.vic.gov.au and go to legal-

profession/managing-your-clients-money/trust-accounts/ to view the list and information
about opening trust accounts.

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Accounts

Trust Money and the Requirement to Bank

Trust money is defined in section 3.3.2 LPA and Reg. 3.3.2 LPR. In summary, it is:

All money received in the course of professional business by a law practice

on behalf of another person.

Where such money is received, section 3.3.13 provides that unless it is handed straight on
by the law practice to whomever the client required the money to go to (Transit Entry), or into
a specified single account as directed (controlled money), the money received MUST be
banked and retained in the trust account until either deposited with the Legal Services Board
(See Statutory Deposit page 1.18.1) or paid to whomever the client requires.

The penalties for failing to bank trust money as required by section 3.3.13 are set out in that
section.

Where money received is a combination of trust and office money, the whole amount must
be paid into trust. If there is any doubt as to whether a receipt is trust or not, pay the amount
into trust to be on the safe side.

Records must be kept of all trust money received so that AT ANY TIME the records will
show:
1. who is entitled to the money;
2. the transaction to which the records relate;
3. the date of the transaction;
4. enough information, properly arranged, to enable convenient and proper audit.

Again, there are penalties for failure to keep proper records as required by section 3.3.25
LPA.

Deficiencies
The trust account may be thought of as a series of drawers in the one chest. When money
is received on behalf of client "A", it is paid into the trust account and goes into ledger (or
drawer) “A”. The money in ledger “A” can only be used for client "A". It cannot be used for
client "B".

Should the law practice pay out of ledger (or drawer) "A" more money than is held on behalf
of client "A", then money must have come out of another client's ledger (or drawer) to meet
that payment. This creates a DEFICIENCY in the trust account.

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If a law practice does not pay all the money received into the bank, there is a deficiency.

If a law practice cannot account properly for trust money received, it has a deficiency.

Deficiency is defined in the s 3.3.21 LPA:

“cause” includes be responsible for;

“deficiency” in a trust account or trust ledger account includes the non-inclusion or
exclusion of the whole or any part of an amount that is required to be
included in the account;

A deficiency is caused “without reasonable excuse”. A reasonable excuse would include any
deficiency which was caused solely by bank error.

Thus a deficiency caused solely by bank error is not a deficiency for the purposes of the
rules. If the deficiency was caused by the Bank and the law practice had no control over it, it
should still be reported to the Board. Draw any deficiencies to the attention of your External
Examiner anyway.

ALL DEFICIENCIES MUST BE REPORTED IN WRITING TO THE BOARD - s 3.3.22 LPA

Defalcation
Defalcation the deliberate act of embezzling, or fraudulently misusing or failing to account for
a client's funds punishable by a maximum of 15 years imprisonment sec 3.3.21 LPA.

Causing a deficiency in the trust account without reasonable excuse is a crime punishable by
a maximum of 4 years imprisonment sec 3.3.22 LPA.

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Accounts

The Flow of Money through the Trust Account: The "U Curve"

In trust accounts - the flow of money through the account is described as the U Curve.

It can be represented diagrammatically as a “U Curve” with steps.

It is a simplistic view of the standard trust transaction - money coming in from a client to the
client's drawer in the trust account, and after being cleared, being paid out of the trust
account again in accordance with the client's instructions.

Each step along the u curve must be recorded and that can be shown diagrammatically as
follows:

Trust Banking U Curve

Money In Money Out

Step 1 Step 6
1.1 issue receipt 6.1 write trust account cheque
trust receipt book
6.2 record details on trust account cheque
1.2 complete bank pay in slip & bank butt

Step 2 Step 5
enter details of the receipt in the enter details of the payment in the Trust
Trust cash receipts book (date cash payments book
received)
Step 3 Step 4
write up details of receipt in client 4.2 write up details of the cheque payment
trust ledger and show balance on the client trust ledger card and
show balance
4.1 check client trust ledger for cleared
funds

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Receipts
In practice, steps 1.1 and 1.2, 2 and 3 should be done in precisely the order stated;

NOTE: it may be that you do not physically bank the cheque until the day after the
other entries are made. This may be because the Bank is not open on the
day the money is received from the client. However, the date of receipt in
your trust account is the day you received the money, not the date it was
banked.

BEWARE: of issuing a receipt and entering the other records whilst forgetting to bank
the cheque, then checking the ledger, noting the credit on the ledger and
issuing a cheque in payment although the money is not banked.

MORAL: ALWAYS bank cheques as soon as possible after they are received.

Payments
In practice, steps 4, 5 and 6 will all be done at the one time. As a minimum, you will issue
the cheque and record the details on the cheque butt which will enable you to write up the
other records later HOWEVER you should always check the client ledger to see whether
there is enough money to cover the cheque.

This U curve then generates the following 6 trust books of record:

1.1 Trust Receipt book

1.2 Trust Account Bank Deposit book

2. Trust Account Receipts Cash Book

3. and 4. Client ledger

5. Trust Account Payments Cash Book

6.1 & 6.2 Trust cheque book

Let us now look at each of these trust books of record in turn.

Exercise
Do exercise 1 and Exercise 2 on pages 5.1.1 and 5.2.1 (onsite) OR the
Learning Environment (online).

Check your answer against the suggested answer at p/accounts (onsite) OR

the Learning Environment (online).

Onsite Trainees show the Consultant your answers to 1 and 2 when you attend
with Exercise 3.

Have the Consultant initial your Exercise Assessment signoff sheet.

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Trust Account Receipt Book

Step 1 of the “U Curve” and see Reg. 3.3.9 LPR:

When trust money is received, unless it is handed on directly (TRANSIT) (Reg. 3.3.27) or
banked into an exclusive account as directed (CONTROLLED MONEY Reg 3.3.23), a
receipt must be issued from the general trust account with the required information as set
out in Reg. 3.3.9.

The receipt book must contain consecutively numbered receipts and duplicate copies. The
original receipt is retained in the trust receipt book or on a client's file unless the client
requests a receipt. All the information required by Reg. 3.3.9 must be included.

The required particulars are:

(a) the date the receipt is made out and, if different, the date of receipt of the money;
(b) the amount of money received;
(c) the form in which the money was received;
(d) the name of the person from whom the money was received;
(e) details clearly identifying the name of the client in respect of whom the money was
received and the matter description and matter reference;
(f) particulars sufficient to identify the purpose for which the money was received;
(g) the name of the law practice under which the law practice engages in legal practice
and the expression “trust account” or “trust a/c”;
(h) the name of the person who made out the receipt;
(i) the number of the receipt.

The following is a guide to completing a trust receipt:

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LEO CUSSEN CENTRE FOR LAW 0251

Date Received FULL DATE & RECEIVED 20

Date Receipted DATE YOU WROTE RECEIPT 20

TRAINING MATERIAL ONLY

Received from . PERSON MAKING PAYMENT by cheque / cash / draft/eft
the sum of AMOUNT OF PAYMENT IN WORDS
dollars cents

being (FULL DETAILS – CLIENTS NAME, FILE NUMBER, AND MATTER PLUS THE REASON THE MONEY IS RECEIVED)

$ AMOUNT IN FIGURES:_____
NAME OF PERSON COMPLETING RECEIPT XXXX
BLOCK LETTERS

FIRM NAME. XXXX .

LAW PRACTICE TRUST ACCOUNT

Note

The person making payment may not necessarily be your client, hence full details need to
be completed on ALL receipts to clearly identify the moneys received and to whose credit
they are paid.

Where the money received is a Bank Cheque: note money received from XXX Bank, and
then on behalf of whom the cheque was issued in brackets behind e.g. “Leo Bank” (for our
client John Grey)

For instance see the following sample receipts (numbered 20060 and 20061).

20060: Details a payment received by Leo Cussen & Co on behalf of its client, Frank
Thomas, from Laurie Smith & Co., the law practice acting for the other side
“Jenkins” in a debt collection matter - the receipt clearly 'ear marks' the funds for the
Credit of Frank Thomas.

20061: Details of a payment received from a client (again Frank Thomas, same matter) on
account of anticipated costs and disbursements.

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LEO CUSSEN CENTRE FOR LAW 20060

Date Received 25th January 20 XY

Date Receipted 28th January 20 XY

LAURIE SMITH & CO cheque

TRAINING MATERIAL ONLY
Received from . by

the sum of FIVE THOUSAND

dollars cents

being AMOUNT COLLECTED IN SETTLEMENT OF CLAIM

CREDIT FRANK THOMAS – FILE NO XY/4816

RE: F.THOMAS V R.JENKINS DEBT COLLECTION

$ 5,000: 00 NAME OF PERSON COMPLETING RECEIPT LEONIE CUSSEN
BLOCK LETTERS

FIRM NAME. LEO CUSSEN & CO .

LAW PRACTICE TRUST ACCOUNT

LEO CUSSEN CENTRE FOR LAW 20061

Date Received 25th January 20 XY

Date Receipted 20

Received from . FRANK THOMAS by cash

TRAINING MATERIAL ONLY

the sum of SIX HUNDRED

dollars cents

being ON ACCOUNT OF COSTS AND DISBURSEMENTS

FILE NO XY/4816 CREDIT: FRANK THOMAS

RE: F.THOMAS V R.JENKINS DEBT COLLECTION

$ 600: 00 NAME OF PERSON COMPLETING RECEIPT LEONIE CUSSEN
BLOCK LETTERS

FIRM NAME. LEO CUSSEN & CO .

LAW PRACTICE TRUST ACCOUNT

How to Receipt an Electronic Transfer

Under the current LPR, a trust account receipt must be written for all credits to the trust bank
account. This includes direct credits through the medium of electronic transfers.

In the case of all electronic transfers the receipt should be dated the day the money is
credited to your trust account. This is controlled by section 3.3.7 (2) LPA.

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Note

ELECTRONIC TRANSFERS CONSTITUTE CLEAR FUNDS AND CAN BE DRAWN

AGAINST IMMEDIATELY.

LEO CUSSEN CENTRE FOR LAW 20062

Date Received 15TH July 20 XY

Date Receipted 20

Received from . JAMES RICHARDSON by electronic t/f

TRAINING MATERIAL ONLY

the sum of FIFTY-NINE THOUSAND

dollars cents

being BALANCE OF PURCHASE MONEY FOR PURCHASE

FILE NO 1576/XY CREDIT: JAMES RICHARDSON

RE: J. RICHARDSON FROM A.ALLANSON

$ 59,000: 00 NAME OF PERSON COMPLETING RECEIPT LEONIE CUSSEN

BLOCK LETTERS

FIRM NAME. LEO CUSSEN & CO .

LAW PRACTICE TRUST ACCOUNT

Receipt of Trust Money in a False Name

Recording of dealings in the trust account on behalf of clients using a false name is a breach
of s.3.3.26 LPA. Penalty - 120 penalty units.

Copies of Receipts issued must be kept for seven (7) years: s.3.3.25 LPA and Reg. 3.3.36
LPR.

RECEIPTS - GENERALLY

DO NOT:
• Back date receipts.
• Leave receipts blank and use them later.
• Have them recorded in the trust receipts journal out of numerical sequence.
• Cancel the receipt and destroy the original.
• Remove the original and duplicate from the receipt book altogether.

If you make a major mistake on the receipt cancel it like this and start afresh.
Leave the cancelled receipt and duplicate in the receipt book. If you make a minor mistake
when writing out a receipt, cross out, and write legibly above the cross out. Don't give the
appearance of trying to conceal anything.

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Trust Account Bank Pay In Book

Section 3.3.13 LPA requires all trust money received and not transited to be BANKED
FORTHWITH in the trust account and to be kept there until it is paid out in accordance with
the client's instructions (or deposited with the Legal Services Board).

In order to bank monies received, Regulation 3.3.10 requires a deposit slip to be made out
itemising the money banked, the account to which it is to be credited, date and details of
drawer.

Banks generally print their own stationery for this purpose, and it can be personalised to
show the name of your trust account and your trust account number. The bank deposit slip
consists of two parts - the bank deposit slip, and the bank deposit stub. The slip is kept by
the bank when the money is deposited, and the stub is retained by you (stamped by the
Bank) as your record that the deposit has been made.

The same details required on the receipt must be kept on your bank deposit book stub.

It records the actual moneys that are banked into the trust account and provides a
permanent record, confirmed by the Bank.

The actual deposit of cheques and cash must agree with the details in the receipt book.

The deposit book consists of pages with two parts:

PART A: This portion is retained by the law practice and forms the record of the Deposit: -
STUB to satisfy Regulation 3.3.10.

FRONT OF STUB BACK OF STUB

DETAILS AMOUNT

Deposit List details of file, name and

Receipt number from whom received.

Detail purpose for which payment

Date “Insert date banked” received - brief whether received by
Account Name cheque, cash or draft, number of
cheque and Bank drawn from.
“Amount of cheques”
Amount Teller &
Stamp

$ “Amount banked”

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PART B: This portion is retained by the Bank: - The Deposit Slip. The front details the
number of cheques, and the cash being banked, the date of and account details. The back
records particulars of the cheques.

FRONT

Deposit CREDIT
Date insert date
Teller No. of .
Items Leo Bank will not be responsible for delays in 100 Cash amount
transmission 50
How Where this deposit is lodged at a bank or branch 20 Cheque
s
many Other than shown above it will be transferred 10 per
cheques under the bank’s internal procedures. 5 reverse amount
for Coin
CREDIT Total total
of YOUR FIRM NAME LAW PRACTICE TRUST ACCOUNT Change $ amount banked
083 000 000 0000

BACK

PARTICULARS OF CHEQUES
Drawer BANK BRANCH NAME OR BSB NO. AMOUNT
Particulars of each cheque banked as required by form Amount of
Each
cheque

PROCEEDS OF CHEQUES ETC NOT AVAILABLE UNTIL CLEARED $ total of all cheques
banked

It may be that more than one cheque is banked at the same time. On Part A: the total
amount will be shown on the front of the stub, with separate details for each cheque on the
back of the stub. On Part B, the total amount is shown on the front of the slip, and details of
the cheques in are shown on the back.

Where a mixture of cash and cheques are banked, details must be provided on the back of
the stub, so that the sources of both cheques and cash can be identified. On the Bank
deposit slip, details of cash banked are shown in the left hand column.

Note

The regulation specifies that the deposit slip given to the Bank, must have the same
information as the slip retained by you in the trust records = so carbon copies. The
stationery you use at Leo for depositing is not carbonised

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The following is the completed slip as it relates to receipts on behalf of Frank Thomas.

A combination of cash and cheque was received in relation to the same matter.

Part A:

Deposit DETAILS AMOUNT

Receipt XY/4816 F. THOMAS V JENKINS
From F.Thomas on a/c
Date 25 / 01 / XY of costs & disb. $600.00 cash
Account Name

LEO CUSSEN & CO LAW PRACTICE

From L. Smith &Co.
debt collected
TRUST A/C
settlement paid $5,000.00
Amount Tellar
$ 5,600.00 & Stamp

Part B:

Deposit CREDIT
Date 25 / 1 / XY
Teller No. of .
Items Leo Bank will not be responsible for delays in 100 Cash 600.00
transmission 50
2 Where this deposit is lodged at a bank or branch 20 Cheque
s
Other than shown above it will be transferred 10 per
under the bank’s internal procedures. 5 reverse 5,000.00
for Coin
CREDIT Total
of LEO CUSSEN LAW PRACTICE TRUST ACCOUNT Change $ 5,600.00
083 000 000 0000

Identify where the:

1. Amount and date are recorded - (this will be verified by bank stamp).

2. Details of exactly the nature and breakdown of the trust funds. In this deposit there
was $600 cash and $5000 cheque. (See reverse of slip for details of cheque, next
page.)

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PARTICULARS OF CHEQUES
Drawer BANK BRANCH NAME OR BSB NO. AMOUNT
L. Smith & Co. Leo Leo Branch 5,000.00

PROCEEDS OF CHEQUES ETC NOT AVAILABLE UNTIL CLEARED $ 5,000.00

Note

Banking must be done each day, in practice.

 If the Leo Cussen Branch of the bank is not open deposit the funds and completed
slip in the bank deposit slot and record on the stub.
 Stationery used by Banks for deposit books varies, but the principle remains the
same: one part retained by the bank listing the money banked and a copy or
separate part kept by the law practices, listing the moneys banked and other
relevant details.
 For Leo purposes, please put your LDX on all deposit slips and on the back of each
cheque banked.

Cheque duplicates or butts must be kept for seven (7) years; and bank pay-in books should
also be kept for seven (7) years: s.3.3.25 LPA and Reg. 3.3.36 LPR.

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Trust Account Cash Receipts Book

Referred to in trust records as TR, short for trust accounts receipts cash book.

You must keep this book by virtue of Reg. 3.3.14 and 3.3.15.

It is used to record all money received and the form in which it was received (whether by
cash or by cheque or electronic transfer (EFT) or otherwise) into the general trust account
and the details of it are taken from your trust receipt book (Step 1.1).

NB: Transit entries are not recorded in the Trust Account Cash Receipts Book.

Controlled money is recorded in the controlled money register with a controlled money
receipt issued.

Details to be given will be the same as those required for the trust receipt, with the addition
of the trust receipt number. However, if more than one cheque is banked on the same day,
an entry in a separate column headed "Banked" is required which shows the total of money
banked on any one day.

This allows you to reconcile moneys received with the Bank statement at the end of each
month. The Bank statement will show only the total money banked on each deposit slip, and
not the individual cheques.

(1) Details required by REG 3.3.15 in the trust account receipts cash book are:
(a) the date a receipt was made out for the money and, if different, the date of
receipt of the money;
(b) the receipt number;
(c) the amount of money received;
(d) the form in which the money was received;
(e) the name of the person from whom the money was received;
(f) details clearly identifying the name of the client in respect of whom the money
was received and the matter description and matter reference;
(g) particulars sufficient to identify the purpose for which the money was received;
(h) details clearly identifying the ledger account to be credited.
(2) The date and amount of each deposit in the general trust account must be recorded in
the trust account receipts cash book.
(3) The particulars in respect of receipts must be recorded in the order in which the
receipts are made out.
(4) The particulars in respect of a receipt must be recorded within 5 working days counting
from and including the day the receipt was made out.

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Variation can be allowed for in stationery. For your purposes, the Trust Account Receipts
Cash Book consists of columns with headings, and details are recorded as appropriate.
Each page in the Trust Account Receipts Cash Book should be numbered consecutively and
referred to on the client ledger.

At the end of each month, total the receipts in the Banked column and rule off. Start a
new page for each month.

The Trust Account Receipts Cash Book records must be retained for not less than seven (7)
years, after completion of the matter: s.3.3.25 LPA and Reg. 3.3.36 LPR

NOTE: An explanation must be given for any deleted entries in this journal, and also why
receipt numbers are recorded out of sequence.

TRUST ACCOUNT CASH RECEIPTS BOOK

For Month Ending Page

DATE REC. CLIENT FILE PURPOSE RECEIVED AMOUNT TOTAL

No. AND No. FOR FROM BANKED
TYPE OF WHICH WHOM PER
MATTER RECEIVED AND IN DEPOSIT
WHAT VOUCHER
FORM
DATE REC. NAME FILE WHAT THE FROM AMOUNT TOTAL OF
CHEQUE NO. OF FILE NO. MONEY WHOM RECEIVED AMOUNTS
REC’D FROM “DIVORCE” RECEIVED PAYMENT RECEIVED
TRUST IS TO BE RECEIVED AND
REC. USED FOR AND HOW- BANKED
BOOK CHEQUE ON
EFT? THAT
DAY

TRUST ACCOUNT CASH RECEIPTS BOOK

For Month Ending 31 JANUARY 20XY Page 5

DATE REC. CLIENT AND FILE PURPOSE FOR RECEIVED AMOUNT TOTAL
No. TYPE OF No. WHICH FROM BANKED
MATTER RECEIVED WHOM PER
AND IN DEPOSIT
20XY WHAT VOUCHER
FORM
Jan 25 200/ F.T. Thomas v XY/ Collected in Laurie 5000 00
060 R.Jenkins 4816 settlement of Smith & Co
- Debt Collection claim - Cheque.
Jan 25 200/ F.T. Thomas v XY/ On account of Frank 600 00 5600 00
061 R.Jenkins 4816 costs and Thomas
- Debt Collection disbursements - Cash
Jan27 200/ R. Verdi XY/ On account of R.Verdi 300 00 300 00
062 RE: M.Verdi 503 Family Crt
- Divorce filing fee - Cheque

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Client Trust Ledger Card

You must keep a separate ledger card for each individual matter relating to each
individual client. This, together with the details required to be entered on each ledger card
is set out in Reg. 3.3.17 LPR.

Reg. 3.3.17 Recording transactions in trust ledger accounts

(1) A law practice that or an approved clerk who maintains a general trust account must
keep a trust account ledger containing separate trust ledger accounts in relation to—
(a) in the case of a law practice—each client of the practice in each matter for which
trust money has been received by the practice;
(b) in the case of an approved clerk—each client of the barrister in each matter for
which trust money has been received by the clerk on account of the legal costs
of the barrister in advance of the provision of the legal services to which those
costs relate.
(2) The following particulars must be recorded in the title of a trust ledger account—
(a) the name of the person for or on behalf of whom the trust money was paid;
(b) the person's address;
(c) particulars sufficient to identify the matter in relation to which the trust money
was received.
(3) Details of any changes in the title of a trust ledger account must be recorded.
(4) The following particulars must be recorded in the trust ledger account in respect of
each receipt of trust money for the matter—
(a) the date a receipt was made out for the money and, if different, the date of
receipt of the money;
(b) the receipt number;
(c) the amount of money received;
(d) the name of the person from whom the money was received;
(e) particulars sufficient to identify the purpose for which the money was received.
(5) The following particulars must be recorded in the trust ledger account in respect of
each payment of trust money by cheque—
(a) the date and number of the cheque;
(b) the amount ordered to be paid by the cheque;
(c) the name of the person to whom the payment is to be made or, in the case of a
cheque made payable to an ADI, the name or BSB number of the ADI and the
name of the person receiving the benefit of the payment;
(d) particulars sufficient to identify the purpose for which the payment was made.

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Reg. 3.3.17 Recording transactions in trust ledger accounts (cont..)

(6) The following particulars must be recorded in the trust ledger account in respect
of each payment of trust money by electronic funds transfer—
(a) the date and number of the transaction;
(b) the amount transferred;
(c) the name and number of the account to which the amount was transferred
and the relevant BSB number;
(d) the name of the person to whom the payment was made or, in the case of a
payment to an ADI, the name or BSB number of the ADI and the name of
the person receiving the benefit of the payment;
(e) particulars sufficient to identify the purpose for which the payment was
made.
(7) The following particulars must be recorded in the trust ledger account in respect
of each transfer of trust money effected by a journal entry—
(a) the date of the transfer;
(b) the amount transferred;
(c) the journal reference number;
(d) the name of the other trust ledger account from which or to which the money
was transferred;
(e) particulars sufficient to identify the purpose for which the payment was
made.
(8) Transactions relating to trust money must be recorded in the trust ledger account
in the order in which the transactions occur.
(9) The particulars in respect of a receipt, payment or transfer of trust money must
be recorded within 5 working days counting from and including the day the
receipt was made out, the payment was made or the transfer was effected, as
the case requires.
(10) The trust ledger account balance is to be recorded in the trust ledger account
after each receipt, payment or transfer of trust money.

Client ledgers must be kept for seven (7) years after completion of the matter: s.3.3.25
LPA and Reg. 3.3.36 LPR

Money received into the trust account for the particular client is shown on the credit side
(right hand side) of the ledger. Money paid out on behalf of that client is shown on the debit
side (left hand side) of the ledger.

The balance of money which is in that client ledger (drawer of the trust account) at any one
time is shown in the balance column (far right hand side of ledger).

Note

Allow sufficient time for the cheque to clear before drawing against it. Official word is
generally – five (5) clear days for all cheques drawn in Australia, and three (3) clear days
for any bank cheques. If in doubt, request bank for a special clearance when banking the
cheque on receipt.

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 1.10.3

The ledger cards relate to the financial history of every client's trust transaction under the
control of a law practices. Full details are required on each entry made on a ledger. (Reg.
3.3.17 LPR) If in doubt, write more.

The following guide can be used in noting the ledger cards.

Some Terms and Narrations Used on Ledger Cards:

Chq Cheque
Csh Cash
E.F.T. Electronic Funds Transfer
B/chq Bank Cheque
TFR/J Transfer Journal
TR Trust Receipts Cash Book
TP Trust Payments Cash Book
C&D Costs and Disbursements
Bal of P/Moneys or Balance of Purchase Moneys
B/P/M Balance of Purchase Moneys
on A/c On Account
I.B.D. Interest Bearing Deposit

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CLIENT FULL DETAILS (SURNAME FIRST) MATTER FULL DESCRIPTION FILE NO. AS PER FILE

ADDRESS USUAL ADDRESS OTHER PARTY NAME OF OTHER PARTY AND TYPE OF TRANSACTION )

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. No./REC. TRUST JNL DEBIT CREDIT BALANCE
MONEY No. PAGE No.
RECEIVED
IN
TR AMOUNT ADJUSTED
FULL PURPOSE FOR WHICH MONEY/CHEQUE RECEIVED AND BANK RECEIPT CASH BOOK OF AMOUNT
FROM CHEQUE
DATE WHOM (TIES IN WITH RECEIPT AND TRUST A/C EFT NUMBER PAGE NO RECEIPT HELD FOR
MONEY CASH BOOK) CASH CLIENT
RECEIVED TP
DATE TO WHOM CHEQUE PAID AND FOR WHAT CHEQUE CASH BOOK AMOUNT
OF NUMBER PAGE OF
CHEQUE NUMBER CHEQUE

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 1.11.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Examination of Example Trust Ledger Card

The following guide indicates the main points to be highlighted at points 1 - 13 on the
Johnson (Purchase) Trust ledger card and the Johnson Sale Trust Ledger card which follow
in the notes at pages 1.11.4 and 1.11.5.

Point 1 - Client Details

Full client details a current and contact address.

Point 2 - Matter Details

Full details of the matter - a general description is not sufficient, for example,
"conveyancing". A correct description would include:
• the other party(ies);
• any property details, addresses etc;
• any other relevant details sufficient to identify the matter.

Point 3 - Ledger Number/File Number

This number conventionally coincides with the client file number.

The number is quoted in the trust account cashbook when an entry is posted to the ledger to
establish a two-way audit trail.

The information on your trust ledger card must match the records on the file and vice versa.

Point 4 - Date
These dates must be correct and are the same as the dates in the receipt book.

The dates must be in chronological order.

Point 5 - Trust Account Cheque

You can only draw on the client’s trust account money for the purpose for which you
received the money. This is a cheque drawn from the trust bank account to obtain a title
search for the client. It was paid out of trust because money was obtained from the client to
pay disbursements. If no money was obtained, this expense would be met out of the office
account and become a file disbursement.

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 1.11.2

Point 6 - A Trust Transfer

A special procedure must be followed to transfer money between different trust ledgers (see
Transfer Journal page 1.16.1).

Refer also to the sale ledger (No. 15979) to show the other side of the entry. The entry in the
Transfer Journal is noted, and the signature of the person authorising the transfer.

Point 7 - Bank Cheque Receipts

If the proceeds were credited to the trust via a bank cheque, then the funds can be used
within 3 days of banking.

The 'B/Chq' Symbol is used to indicate 'Bank Cheque'.

Point 8 - Drawing a Bank Cheque

To obtain a Bank Cheque from trust funds the law practice needs to draw a cheque to the
bank which in turn will exchange that cheque if these are cleared funds for a Bank Cheque.
The details are either written after the word "payee" or endorsed on reverse of cheque if
more than one Bank Cheque is required. A sample is provided see page 4.3.2.

Remember: A Bank cheque will only be provided in exchange for cleared funds.

Point 9 - Fees
After a Bill of Costs is rendered, the fees may be paid from trust by drawing a trust cheque,
and paying it into the office account. (Reg. 3.3.34 LPR)

REG. 3.3.34 (3) + (4)

Unless withdrawn in accordance with a costs agreement, withdrawn with client instructions
or is owed to the practice by way of reimbursement of disbursements (money paid by the
practice on behalf of the client) the law practice must wait seven (7) days after rendering
the bill of costs before drawing a trust cheque and paying it into the office account.

Points 10 & 10a - Referring System

The columns are completed when the details of the cash books are posted to the client’s
trust ledger together with a reference to the cheque, receipt, or journal page number.

The purpose: to create a clear audit trail so the external examiner can follow the entity
through all the books (around the U curve) and to the file.

For example, the terms used on this ledger include:

• 'TR4' Trust Account Receipts Cash Book - page 4.
• 'TP7' Trust Account Payments Cash Book - page 7.
• 'TJ4' Trust transfer Journal - page 4, etc....

Completion of this column is done at the time of posting.

Point 11
Form in which the money was received.

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 1.11.3

Point 11 - Errors
Errors on ledgers should not be erased or “whited” out. The error should be ruled out and the
correct entry follows immediately after the correction. The errors, when corrected, should
be initialled.

Points 12 and 13 - The Final Balance and Closed Ledger

A running balance must be kept in the balance column. Update after each entry to the ledger
card always shows the current balance in the client’s ledger in trust.

When the matter is finished, the final balance should always be 'NIL' and noted as such. All
moneys must be accounted for and any 'surplus' in the client's ledger should be sent to the
client, along with a final trust statement and Bill of Costs (if any).

The ledger can, of course, be reopened provided the funds banked into the ledger relate to
the client and the matter of the closed ledger.

The double lines under the 'nil' balance provide an easy indication that the ledger is final and
closed. The client file should have on it a copy of the rendered account, a trust statement
and a copy of the trust ledger. The Ledger card cannot be archived until it is audited.

Note

These notes and the Johnson Ledger cards should be reviewed after you have completed
the section relating to trust payments and the Transfer Journal.

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 1 2
3

CLIENT Johnson, Graham & Linda MATTER Purchase of Property at 63 Severn St, Box Hill South FILE NO. /6417

ADDRESS 72 Angle Road, Blackburn OTHER PARTY Re: L.A. & M.J. Browns

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. JNL PAGE DEBIT CREDIT BALANCE
20XY MONEY No./REC. No.
RECEIVED No.
4 IN
25/1 Fr. G. Johnson, cash on a/c of costs and disbursements Cash 690 CR pg 7 200 00 200 00
2/2 Registrar of Titles – title search fee 598630 CP pg 10 6 30 193 70
5 M.M:B.W. – Rates, encumbrance cert. 598631 CP pg 10 17 60 176 10
R.C.A. Certificate 598632 CP pg 10 6 40 169 70
Ministry of Housing Certificate 598633 CP pg 11 13 00 156 70
4/2 Transfer from file No. 8/5979, G & L
6 Johnson, Sale to R. Smith being bal. of deposit funds on sale to be Trans jnl 7500 00 7,656 70 11
used for purch. Auth: L. Cussen No XXX
5/2 Collins & Co (v’s Sol) payment of bal. of deposit due on purch. 598634 TR p11 7500 00 156 70
Cheque cancelled 5/2/XY L. Cussen 7,656 70
5/2 Collins & Co(v’s Sol) payment of balance of deposit due on Cheque 598635 CP p.11 7000 00 656 70
purchase
7 23/3 Fr G. Johnson, bank cheque – balance of purchase money Bank 695 CR p9 45000 00 45,656 70
Cheque
26/3 Fr. G. Johnson, cash: balance of purchase money and cost & Cash 696 CR p.9 2,300 00 47,956 70
disbursements
8
26/3 To Leo Bank for bank cheque payable to L.A. & M.J. Browns – 598640 CP p.12 46,886 70 1070 00
balance of purchase money
30/3 To Leo Cussen & Co: costs and disbursements as per account No. 598642 CP p.13 1070 00 NIL
9 71/4 25/3/XY
10a
10b 13
10 12

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 1 2

3
CLIENT Johnson, Graham & Linda MATTER Sale of Grey Oaks, Mernda FILE NO. /5979

ADDRESS 72 Angle Road, Blackburn OTHER PARTY Re: J. Simpson

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. TRUST DEBIT CREDIT BALANCE
20XY MONEY No./REC. JNL PAGE
RECEIVED No. No.
4 IN
24/1 RE: J. Simpson bk/chq - deposit BK/CHQ
Rec’d in Reln to Sale 688 CR P5 18,000 00 18,000 00
4/2 Transfer to file No. 8/6417, G&L
Johnson from L.A. & M.J Browns,
6 To pay bal of dep on their purchase TJ No 53 7,500 00 10,500 00
Authorised “L. Cussen”

5/2 To G. Johnson, part bal of purchase money, for purchase

11 5/2 To G & L Johnson, balance of deposit funds received on sale 598636 CP p.11 10,500 00 NIL

CR = Cash Receipt Journal (Trust)

CP = Cash Payment Journal (Trust)

TI = Transfer Journal

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 1.12.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Trust Account Cash Payments Book

Trust Account Payment Cash Book is regulated by Reg. 3.3.16 LPR.

It is a mandatory book of the trust account and is used to record all moneys debited from the
trust account - i.e. - paid out.

Required details are set out in the Regulation 3.3.16.

Reg. 3.3.16 Trust account payments cash book

(1) The following particulars must be recorded in a law practice's or an approved
clerk's trust account payments cash book in respect of each payment of trust
money by cheque—
(a) the date and number of the cheque;
(b) the amount ordered to be paid by the cheque;
(c) the name of the person to whom the payment is to be made or, in the
case of a cheque made payable to an ADI, the name or BSB number of
the ADI and the name of the person receiving the benefit of the payment;
(d) details clearly identifying the name of the person on whose behalf the
payment was made and the matter reference;
(e) details clearly identifying the ledger account to be debited;
(f) particulars sufficient to identify the purpose for which the payment was
made.
(2) The following particulars must be recorded in a law practice's or an approved
clerk's trust accounts payments cash book in respect of each payment of trust
money by electronic funds transfer—
(a) the date and number of the transaction;
(b) the amount transferred;
(c) the name and number of the account to which the amount was
transferred and the relevant BSB number;
(d) the name of the person to whom the payment was made or, in the case
of a payment to an ADI, the name or BSB number of the ADI and the
name of the person receiving the benefit of the payment;
(e) details clearly identifying the name of the person on whose behalf the
payment was made and the matter reference;
(f) details clearly identifying the ledger account to be debited;
(g) particulars sufficient to identify the purpose for which the payment was
made.

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 1.12.2

(3) The particulars in respect of payments must be recorded in the order in which the
payments are made.
(4) The particulars in respect of a payment must be recorded within 5 working days
counting from and including the day the payment was made.

Entries are taken from the trust cheque butts. The cash book must record ALL details
contained in the cheque and the cheque butt.

The following provides a guide to complete Trust Account Payments Cash Book and gives
examples of typical entries.

At the end of each month, total up the payments and record the total at the bottom of the
page. Then start a new page for the next month's payments.

Note

An explanation must be given for any deleted entries in this cash book, and also why
cheque numbers are recorded out of sequence.

TRUST ACCOUNT CASH PAYMENT BOOK

For Month Ending xxx / Month / Year Page xx

DATE CHQ. CLIENT FILE PURPOSE PAID TO AMOUNT

No./EFT AND MATTER No. OF
PAYMENT
DATE OF No. CLIENT FILE FOR TO AMOUNT
CHEQUE AND NO. WHAT WHOM
NAME CHEQUE
OF FILE PAID
AND
TYPE OF FILE

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 1.12.3

Trust Account Cash Payment Book

For Month 31 March 20XY Page 10

Ending

DATE CHQ. CLIENT FILE PURPOSE OF PAID TO AMOUNT

20XY No./EFT AND MATTER No. PAYMENT
19/3 059/658 J. Smith from I. Allwood 59/XY Bal. of purchase D. Were 109,536 00
money due (V’s Sol)
from settlement
20/3 059/659 A. Verdi vs R. Verdi 60/XY Counsel’s fee on B. Stone 450 00
pre-trial from
hearing A.Barrister
30/3 059/660 A. Begg vs S. Tain 40/XY Bad Debt A. Begg 225 00
collected less
costs and
disbursements
Total March Payments 110,211 00

NOTE: At the end of each month total the payments to the bottom of the page and then
commence the next month’s payments on the next page.

NOTE: For Leo purposes, please include your LDX on all cheques drawn.

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 1.13.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Trust Account Cheque Book

(See Reg. 3.3.12 LPR)

Always check there is money in the trust ledger before the cheque is written to guard
against overdrawing the client's individual ledger which creates a deficiency in the trust
account and is an offence under s.3.3.21 LPA.

In medium to large sized practices, trust cheques are requisitioned by a form, which, when
completed, provides the accountant with all appropriate information to enable the cheque to
be drawn and the amount debited to a particular client ledger. The required signing officers
for any cheque are detailed in Reg. 3.3.12 (3) and must be adhered to.

Each cheque must be pre-stamped with the words "Not Negotiable" - see Reg. 3.3.12 (2)
(b). This means that the cheque can only be paid into an account of the payee unless
otherwise directed. The law practice’s name and the expression “Law Practice Trust
Account” needs to be on the cheque. A trust account cheque must not be paid to
"Cash" - see Reg. 3.3.12 (2) (a). The cheque must be made payable to a specific
person/entity (and “bearer” crossed out). The cheque must be signed by an authorised
principal of the firm (or other authorised person as per 3.3.12(3).

A sample trust account cheque follows and details the completion of the cheque and the
accompanying cheque butt.

In the case of every cheque drawn on the trust account the following details must be
endorsed on the cheque butt:
(a) the date of payment;
(b) to whom the cheque is made payable, or, in the case of a bank cheque, the person
entitled to the proceeds;
(c) the amount of payment;
(d) trust Ledger details;
(e) sufficient details to identify;
(i) relevant transaction;
(ii) purpose of payment.

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 1.13.2

210878

Date insert Date Insert Date

Payee to whom Pay NAME OF PERSON OR ENTITY TO BE PAID (PAYEE) Or Order
details of file the sum of AMOUNT IN WORDS
Name & number $ AMOUNT IN
Purpose of payment FIGURES
and to whom
Fwd $ amount paid TRAINING PURPOSES ONLY
Chq $ YOUR FIRM Signature of
LAW PRACTICE TRUST ACCOUNT solicitor
Bal $
210878 210878 083 000
Cheque Butt –
retained by you

210879

Date 30/3/XY Insert Date

Payee A. Begg Pay A. BEGG. _____________________________________________________________________ Or Order
XY/40: A.Begg V. the sum of TWO HUNDRED AND TWENTY-FIVE DOLLARS
S. Tam: bad debt
Collected less costs &
$ 225.00
Disbs
Fwd $ TRAINING PURPOSES ONLY
Chq $ 225.00
LEO CUSSEN LAW PRACTICE TRUST ACCOUNT L. Cussen
Bal $
210879 210879 083 000

NOTE: These cheques can only be paid into the bank account of the payee because
they have been crossed and marked "Not Negotiable", as required by the Rules.

NOTE: For Leo purposes, please include your LDX on all cheques drawn.

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 1.13.3

Drawing on cheques
Before drawing a cheque, you must check that there are sufficient cleared funds shown in
the client ledger to cover the cheque to be drawn.

Generally five (5) clear days for all cheques drawn in Australia. Three (3) clear days for any
bank cheque.

In the following circumstances a cheque may be drawn immediately after the funds are
deposited in the Bank:
• Money received in cash.
• Money received by electronic transfer acknowledged by your bank as received.

NOTE - TRUST ACCOUNT CHEQUE CAN BE DRAWN WHEN:

The client's ledger card is up-to-date (ie. all postings done) and funds to the
credit of the client concerned are cleared and there is a credit balance. Then a
cheque may be drawn on that ledger to the extent of that balance only.

EXERCISE 3 AND 4
Please do exercise 3 page 5.3.1 and 4 page 5.4.1 (onsite Trainees) OR Learning
Environment (online Trainees). Onsite Trainees take your answer to the consultants to
discuss and sign off.

Review your answer against the suggested answer on the p/accounts drive (onsite
Trainees) OR Learning Environment (online Trainees).

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 1.14.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Reconciliations

You must check that your trust records match the bank’s records. You must do this at least
once a month.

Within 15 working days of the end of every month, a law practice is required:

1. To calculate the money held by the law practice in the trust account (cash book
reconciliation).
2. Check that the amount of money which the Bank says the law practice holds is the
same as the amount of money which the law practice trust account books disclose it
holds (bank reconciliation).

and

3. That the total of the amounts shown as standing to the credit of clients in their
individual ledgers is the same as that disclosed by the trust cash books as being held
(trust ledger reconciliation).
4. State the date the statement was prepared, by who and who it is authorised by (retain
these statements)

Reg. 3.3.19 Reconciliation of trust records

(1) A law practice that or an approved clerk who maintains one or more general trust
accounts must reconcile the trust records relating to the only or each account.
(2) The trust records relating to a general trust account are to be reconciled as at the end
of each month by preparing—
(a) a statement—
(i) reconciling the general trust account balance as shown in ADI records with
the balance of the practice's trust account cash books; and
(ii) showing the date the statement was prepared; and
(b) a statement—
(i) reconciling the balance of the trust ledger accounts with the balance of the
practice's or clerk's trust account cash books; and
(ii) containing a list of the practice's or clerk's trust ledger accounts showing the
name, identifying reference and balance of each and a short description of
the matter to which each relates; and
(iii) showing the date the statement was prepared.
(3) The statements must be prepared within 15 working days after the end of the month
concerned.
(4) The statements must be retained by the law practice or approved clerk.

The reconciliations form part of the trust accounts external examination.

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 1.14.2

For Leo purposes, each person must send a copy of their monthly trust reconciliation to
their External Examiner within seven (7) days of receipt of the bank statement each
month in order to comply with Leo requirements (care of Registry).

Procedure
There are 3 steps:

1. Cash book Reconciliation.

2. Bank Reconciliation.

3. Ledger Reconciliation. (For Trust Account ONLY)

Step 1: Cash Book Reconciliation

1.1 Note the balance held in the trust account for the previous month;
1.2 Total all receipts for the month being reconciled (see trust accounts
receipts cash book) and add the total cash receipts for the month being
reconciled to the previous month's balance.
1.3 Total all payments made for the month being reconciled (see trust account
payments cash book) and deduct this from the total of the previous month's
balance and all receipts for the month being reconciled.

The figure achieved is the money which you maintain is in your bank
account. That is, your trust account balance for that month.

DIAGRAMMATICALLY
Insert Date

REG 3.3.19: Reconciliation for month ending .................................... 20 .........

Date Reconciliation Prepared .................................... 20 .........

PREPARED BY ............................................ AUTHORISED BY .......................................................

n CASH RECONCILIATION

Cash Book balance from previous month $

ADD Total Receipts $ ____________

SUB TOTAL $
DEDUCT Total Payments $ ____________
Cash Book Balance at end of month *$____________

Balance in trust Total money = Sub Total Total money Money in trust
account at end + received for - paid out for = at end of
of previous month current month current month current month

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 1.14.3

NOTE: Check your trust records are up to date at the end of the month by checking the
bank statements for items showing there but that are not entered in your books,
eg:

∗ Electronic transfers.

∗ Direct deposits made to the Bank by clients and not notified to you.

∗ Cheques dishonoured.

∗ Bank and related fees incorrectly debited to the trust account.

Such entries must be noted in the cash books (with the exception of the bank charge
debits due to error which are noted only on the bank reconciliation as an adjustment).

Then the cash reconciliation can be done.

Remember receipts must be issued for deposits made direct to the bank and the procedures
in Steps 1.1, 2 & 3 followed.

Refer to page 1.17.1 in the materials in relation to specific trust entries relating to stale
cheques etc.

Step 2: Bank Reconciliation

The amount that you maintain in your trust account should be the same as the amount that
the bank statement shows as standing to the credit of your trust account with the Bank.

In the Bank Reconciliation, you are comparing what the Bank says you've got with what your
books say you've got.

Procedure - Simple Bank Reconciliation

If the balance of your cash book reconciliation is the same as the balance shown on your
bank statement for the end of the month being reconciled, then your accounts are probably
correct.

HOWEVER - the following procedure must be gone through to double check your figures are
correct:

2.1 Note the balance of the bank statement for the month being reconciled and put it in the
appropriate space in the reconciliation statement.

2.2 Compare each of the receipts listed in your trust cash receipts journal with each of the
credits noted in the bank statement - check the amount and tick each credit on the
statement off as you go. If the credits shown on the bank statement are exactly the
same as the receipts shown in your trust account receipts cash book for the month
being balanced, nothing further need be done in relation to your receipts.

2.3 Compare each of the payments listed in your trust account payments cash book for the
month being balanced with the debits shown on the bank statement - check each of
the figures and tick the debits off on the bank statement as you go.

If the debits shown on the bank statement are the same as the payments listed in your
trust cash payments journal for the month being balanced, then nothing further need
be done in relation to your payments.

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 1.14.4
Procedure: More Complicated Bank Reconciliations
It may be that the total shown on the bank statement is not the same as the balance shown
in your trust account books after the cash book reconciliation.

Three simple reasons for a difference between these figures are:

2.5 You have part of the money shown as standing to the credit of your trust account in
your books on deposit with the Legal Services Board as required by s. 3.3.62 LPA in
the Statutory Deposit Account (SDA).

To reconcile the bank statement, add this statutory deposit. You MUST always be
aware of this amount because you may need to transfer funds back to meet a client
withdrawal (see p1.18.1)

2.6 You have a credit noted in your trust cash receipts journal which has not yet been
banked, or banked but as yet not showing on your bank statement as a credit.

To reconcile, taking into account this unbanked credit - show it in the reconciliation
statement as a deposit not yet credited and increase the balance shown in the bank
statement by this amount in line with your books.

2.7 You have listed a payment by cheque in your trust cash book which has not yet been
presented to the bank, and thus is not shown in the bank statement as being paid out.
These are known as unpresented cheques.

To reconcile: deduct the total of all unpresented cheques from the balance shown on
the bank statement - this will bring the bank statement into line with your books.

Note

All un-presented cheques must then be listed in the appropriate place on the
reconciliation statement - details of date of the cheque, the payee, the cheque number
and the amount must be shown - the number of the file would also be useful so that it
can be easily traced back to the appropriate ledger.

Procedure: More Problem Bank Reconciliations

Having gone through the steps listed previously; if your reconciliation STILL does not
balance it may be for one of the following reasons:

2.8 A credit has been received by the bank which is not recorded in your books. This may
be a receipt by electronic transfer. Check that all credits on the bank statement are
recorded in your trust account receipts cash book.

Where a credit has been received by electronic transfer, it must be recorded in your
trust receipt books as previously described. Adjust your cash book reconciliation
accordingly.

2.9 It may be that a payment has been debited on the bank statement which is not
recorded in your trust account payments cash book. Check all payments - the bank
may have debited office charges etc incorrectly.

Where the bank has debited a bank charge etc to your trust account incorrectly an
adjustment must be made to the bank reconciliation statement. Insert the words "add

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 1.14.5
debit due to bank error" and add the requisite amount to the bank statement balance.
This amendment should be made in red biro to indicate the amendment.

The bank must be notified immediately of their error and the entry reversed.

Notify your external examiner.

2.10 You may have made a simple arithmetical error. Check your addition and subtraction.

2.11 You may have recorded a credit or a payment incorrectly - check all figures in the trust
account receipts and trust account payments cash books against those shown in the
bank statement.

Diagrammatically, the bank reconciliation statement appears as follows:

n BANK RECONCILIATION

Balance as per Bank Statement $

ADD Deposits not credited $
ADD Funds with SDA $ ________
SUB TOTAL $

DEDUCT Unpresented cheques $ ________

SUB TOTAL $

(here insert any amendments due to bank error) $

Balance as per Bank Account *$________

Unpresented Cheques

Date Payee Cheque No. Amount

_________
$ _________

Add Deposits Deduct total of Make any This should total Balance from
you have Cheques you adjustment due what you say bank statement
received but not have made out to Bank error you hold in trust
yet banked but are not yet
paid by the Bank
Add back funds
List the that are on deposit
unpresented with Statutory
Cheques Deposit account

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 1.14.6

Step 3: Ledger Reconciliations (Trust Account Only)

You are now required to check that the total of the amounts held in each individual ledger is
the same as that shown as the balance by your cash book reconciliation and your bank
reconciliation.

Procedure : Ledger Reconciliation (Trust Account Only)

3.1 List the balances shown in each individual ledger with a credit balance at the end of
the month being reconciled. Client name, file number must also be shown. There is
no need to list ledger cards with a zero balance. Debit balances in ledgers must
also be taken into account. But if your Trust Account is properly run, YOU SHOULD
NEVER HAVE A DEBIT BALANCE IN A LEDGER. Refer s.3.3.22 LPA 2004

3.2 Add all the balances listed and check that the total is the same as that shown in your
cash reconciliation and your bank reconciliation.

Remember to deduct the amount held in the statutory deposit fund at the L.S.B.

Diagrammatically the ledger reconciliation is as follows:

n LEDGER RECONCILIATION

Client File No. Type Date of Last Amount Remaining

of Matter Movement In Account

TOTAL *$___________

Surname File eg. Divorce Date the balance total of all

of Client Number balance in currently ledger balances
the trust in the - must be the
ledger was ledger same as cash
altered book and last
bank reconciliation
balances

Controlled Money
See CRMs page 1.22.1 for commentary. Within 15 days of the end of each month, a law
practice must prepare a statement listing details of all the practices’ controlled money
accounts, sec LPR 3.3.26(8). The last entry on the Leo stationery reconciliation is a reminder
to you of this. You will not hold controlled money in the Leo CM program.

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 1.14.7

Trust Reconciliation for month ending .................................... 20 .........

Date Reconciliation Prepared .................................... 20 .........

PREPARED BY ............................................ AUTHORISED BY .......................................................

n CASH RECONCILIATION
Cash Book balance from previous month $
ADD Total Receipts $ ____________

SUB TOTAL $
DEDUCT Total Payments $ ____________
Cash Book Balance at end of month * $ ____________

n BANK RECONCILIATION
Balance as per Bank Statement $
ADD Deposits not credited $
ADD funds with SDA $ ____________

SUB TOTAL $

DEDUCT Unpresented cheques $ ____________

SUB TOTAL $

(here insert any amendments due to bank error) $

Balance as per Bank Account * $ ____________

Unpresented Cheques

Date Payee Cheque No. Amount

(x/x/20xx) (xx) (xx) ($ xxx)
(y/x/20yy) (yy) (yy) ($yy) (etc)
$ _________

n LEDGER RECONCILIATION

Client File Type of Date of Last Amount

Number Matter Movement Remaining
(xx) (xx) (xxx) (x/x/20xx) ($ xxx)
(yy) (yy) (y/y/20yy) ($ yyy)

* These totals should agree TOTAL *$___________

LIST OF CONTROLLED MONEY ACCOUNTS Reg 3.3.26(8)

No controlled money accounts are maintained

(or – attach details) delete one
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 1.14.8

EXERCISE 6A

After you have completed exercise 5 on page 5.5.1 that relates to the CRMs page 1.16.1
(this will generate the required information for your reconciliation exercise). Please do
exercise 6A page 5.6.1 (onsite Trainees) OR Exercise 6 on the Learning Environment
(online Trainees). Onsite Trainees take your answer to the consultants to discuss and sign
off.

EXERCISE 6B

This is optional.
Onsite Trainees may do exercise 6B on page 5.6.6.

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 1.14.9

Reconciliation of Trust Cash Book at Month End with List of Client

Balances Total at Month End and with Trust Bank Statement
Balance at Month End

STEP 1 OBTAIN BALANCE OF TRUST BANK AT MONTH

END FROM THE TRUST BANK STATEMENT

STEP 2 ESTABLISH WHETHER THERE ARE ANY TRUST

DEPOSITS OUTSTANDING AT MONTH END.
Every entry in the trust receipts cash book for the
month has to be matched with deposit entries on the
bank statement for the month.
Tick entries as matched.
Any unticked items in the receipts cash book will be
outstanding deposits at month end, ie a timing
difference.
The total of outstanding deposits are to be added.

STEP 3 ESTABLISH WHETHER THERE ARE ANY TRUST

OUTSTANDING CHEQUES AT MONTH END.
Every entry in the trust payments cash book for the
month has to be matched with cheque entries on the
bank statement for the month.
Tick entries as matched.
Any unticked items in the payments cash book will be
outstanding cheques at month end, ie a liming
difference.
The total of outstanding cheques are to be deducted.

STEP 4 GO TO PREVIOUS MONTH·S RECONCILIATION TO

ENSURE ALL RECONCILING ITEMS HAVE BEEN
CLEARED DURING THE CURRENT MONTHS
MATCHING OF TRANSACTIONS
If items still unmatched these are carried forward to the
current month's items until subsequent clearance.

STEP 5 ESTABLISH WHETHER THERE ARE ANY OTHER

ENTRlES ON THE TRUST BANK STATEMENTS FOR
THE MONTH THAT HAVE NOT BEEN MATCHED
These unmatched items require Investigation, ie you
may need to contact the bank.
The debit entries on the bank statements maybe bank
charges incorrectly charged to the trust bank or other
bank errors.
Any debit entries would be totalled and added.

The credit entries on the bank statements maybe direct

deposits that the legal practice was not aware of or
other bank errors.
The narration for unknown direct deposits would be -
Deposits not yet receipted until next month.
Any credit entries would be totalled and deducted.

***Must equal Total Trust Monies in trust ledger

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 1.15.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Transit Entries (The Short Cut)

Where trust money is received from or on behalf of a client and it is handed straight on to
the person for whom it is destined, without being banked, the procedure set out in Reg.
3.3.27 MUST BE FOLLOWED.

Division 5—Transit Money

Reg. 3.3.27 Information to be recorded about transit money

(1) This regulation has effect for the purposes of section 3.3.16 of the Act.
(2) A law practice must, in respect of transit money received by the practice, record
and retain brief particulars sufficient to identify the relevant transaction and any
purpose for which the money was received.

• No receipt is issued, from the trust receipt book.

• The money is not banked.
• The amount is not shown in the trust account receipts cash book nor in the trust
account payments cash book.
• The amount is not taken into account in the monthly reconciliations.
• No trust account cheque is issued for the amount.

BUT Full details of the cheques (preferably photocopies) must be kept on the relevant file to
disclose the amount of the cheques together with full details of where they came from, where
they went to, and why. You need to account to the client for these cheques.

Leo Cussen Requirement:

In the past a transit register was required to be kept. Whilst it is no longer compulsory to
keep such a register, it is suggested that you still maintain a central list of all transit cheques
because it will make maintenance of records easier. For this reason the optional "Transit
Record" has been included in your books of account.

An additional suggestion is to make two photocopies of any transit cheque received. One
copy of the transited cheque can be kept on the file, and the other copy can be kept with the
Transit Record.

So, there are several ways the practitioner may comply with this Regulation. The first is to
continue to record entries on the client trust ledgers in the particulars column only. The
second is to record in a Transit Register. The third method of complying with this regulation
is to retain photocopies of all transit cheques and full details on the file. If from the payee
the purpose of the payment is not evident, it should be hand written on the copies of the
cheques and placed in the matter file and transit record.

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 1.15.2

Following is an example of a transit register entry, with completed examples to cover the
following situation.

You act for Alex Fountain and Son Pty. Ltd., who has sold vacant land at Rye to A.
Eckersley, who is acting for himself. At settlement you receive a bank cheque from
Mr. Eckersley for $25,000 drawn on the Commonwealth Bank, Leo Cussen Branch.
This is the balance of purchase money, and you hand it to a representative from Alex
Fountain & Son on the same afternoon as settlement - 13 May 20XY. The
Commonwealth Bank did not attend settlement.

DATE CLIENT’S NAME AMOUNT FORM FROM TO WHOM DATE OF

REC’D & TYPE OF MONEY WHOM PAID AND DISPOSAL
20XY MATTER RECEIVED REC’D AND FOR WHAT
IN FOR WHAT PURPOSE
PURPOSE
(Drawer of
Chq/Draft)
13/5 Alex Fountain & Son 25,000 00 Bank/Cheque Commonwealth Joe Smith of 13/5/XY
P/L Bank Alex Fountain &
(A. Eckersley) Son P/L
File No. 160/XY Bal of purchase
money received
at settlement

AND/OR:

1. You photocopy the Bank cheque, and keep the photocopy on the relevant file. Keep a
note on your file.
2. “Bank cheque CBA for $25,000 received from CBA (A Eckersley – Purchaser) at
settlement 13/5/20XY payable to Alex Fountain & Son Pty Ltd being part balance of
purchase money received at settlement. Handed to Joe Smith of Alex Fountain & Son
Pty Ltd 15/5/20XY”.
3. Have Joe Smith sign a receipt for the cheque.

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 1.16.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Transfer Journal

A separate ledger must be opened and kept for each separate client and in respect of each
matter for that client. Money deposited to ledger “A” can only be used for that ledger (or
matter) UNLESS the client authorises the use of money in ledger “A” for use in ledger “B”, or
there is some other appropriate reason why money is transferred from one ledger to another.

The Transfer Journal is used to record the movement of trust funds WITHIN the trust
account from one ledger (or drawer in the trust account) to another, in accordance with the
requirements of LPR 3.3.18.

Reg. 3.3.18 Journal transfers

(1) Trust money may be transferred by journal entry from one trust ledger account in a
law practice's or an approved clerk's trust ledger to another trust ledger account in
the trust ledger, but only if—
(a) the law practice or approved clerk is entitled to withdraw the money and pay it to
the other trust ledger account; and
(b) the transfer has been authorised in writing—
(i) by a person who is authorised to sign cheques drawn on the general trust
account without a cosignatory; or
(ii) by 2 or more persons who are authorised to sign cheques drawn on the
general trust account jointly.
(2) A law practice or an approved clerk must keep a trust account transfer journal if the
practice or clerk transfers trust money by journal entry.
(3) The following particulars must be recorded in the trust account transfer journal in
respect of each transfer of trust money by journal entry—
(a) the date of the transfer;
(b) the trust ledger account from which the money is transferred (including its
identifying reference);
(c) the trust ledger account to which the money is transferred (including its
identifying reference);
(d) the amount transferred;
(e) particulars sufficient to identify the purpose for which the transfer is made, the
matter reference and a short description of the matter.
(4) Journal pages or entries must be consecutively numbered.
(5) A law practice or an approved clerk must keep particulars of the authorisation for
each transfer of trust money by journal entry, whether in the trust account transfer
journal or in some other way.

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 1.16.2

Common examples where the Transfer Journal issued:

• The transfer of funds from one client ledger card to another client's ledger card when
(within the regulations) a law practices acts for the vendor and purchaser and, in
accordance with settlement instructions, transfers funds from the purchaser's ledger to
the vendor's ledger. The settlement instructions would be on the files.

• The transfer of funds, namely costs and disbursements, from the client ledger card to
the law practice’s ledger card (costs ledger) on the rendering of an account.

Some large firms create a separate ledger account in the firm named the "costs
ledger," and transfer costs out of a number of client accounts where they are due,
each day, into the costs ledger. The cost ledger must be debited not later than one
month after the day on which the money was transferred from the client ledger to the
costs ledger. Then one cheque (for that period), is drawn from the costs ledger
payable to the practices office account. This is not essential, and smaller law practices
just draw a trust cheque in respect of costs on ledger X and pay it direct to the office
account.

Smaller firms pay costs for each client by separate cheques drawn on the client’s
ledger.

• The transfer of funds from a client's ledger card to another ledger card in another
matter for the same client. Such a transaction requires the client’s authority on file.

The Transfer Journal must be retained for seven (7) years: ss. 3.3.25 LPA and 3.3.36 LPR.

Note the following examples:

• general outline of entry in Transfer Journal;
• specific example of entry in Transfer Journal transferring funds from client Hanns sale
ledger to client Hanns purchase ledger;
• related entries on client Hanns trust ledger cards.

EXERCISE 5

Please do exercise 5 page 5.5.1 (onsite Trainees) OR the Learning Environment (online
Trainees). Onsite Trainees discuss your answer with a consultant. Have the consultant
sign your Exercise Assessment sign off sheet and check your answer against the example
on the p/accounts drive.

EXERCISE 6

You are now able to do exercise 6 Reconciliation, referred to in the CRMs at page 1.14.8.
Exercise 6 is at page 5.6.1 (onsite Trainees) OR on the Learning Environment (online
Trainees).

Onsite Trainees may like to extend their learning by attempting Exercise 6B page 5.6.6.
This is optional.

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 1.16.3

TRANSFER JOURNAL

Page

DATE PARTICULARS FILE NO OF DEBIT CREDIT AUTHORISED

20XY NO ENTRY BY
Date of Insert details of file to be File No. Give each Amount Record who
transfer debited entry a Authorised the
Month/day Ie file from which the money is number. transfer –
taken Number signature
consecutively

Insert details of file ledger to be File No. Amount NOTE:

credited corresponding
Ie file/ledger to which the details to appear on
money is to be transferred respective ledgers

EACH ENTRY IS RULED OFF

TRANSFER JOURNAL

Page 72

DATE PARTICULARS FILE NO OF DEBIT CREDIT AUTHORISED

20XY NO ENTRY BY
2/2 J.Hanns – Sale to Jayd balance 167/XY 53 5,609 00
of deposit funds transferred to
meet bal. of dep. On purchase
J.Hanns – purchase from 169/XY 54 5609 00
SALTMAN – balance of L. Cussen
deposit for purchase 2/02/XY

© Leo Cussen Institute f:\2013\PTC\Accounts c2

CLIENT HAANS, John MATTER Purchase of 86 Simpson St, East Melbourne FILE NO. 169/XY
ADDRESS 4 West Street Footscray OTHER PARTY Re: A. Saltman

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. TRUST JNL DEBIT CREDIT BALANCE
20XY MONEY No./REC. PAGE No.
REC’D IN No.
2/2 Transferred from file No. 167/XY: Haans to Jayd: Balance of TJ 54 5609 00 5609 00
deposit received on sale to be used as balance of deposit on
purchase. Authorised L. Cussen 2/2/XY

1.16.4
CLIENT HAANS, John MATTER Sale of 9 Musgrove St, Box Hill FILE NO. 167/XY
ADDRESS 4 West Street Footscray OTHER PARTY Re: Peter JAYD

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. TRUST JNL DEBIT CREDIT BALANCE
20XY MONEY No./REC. PAGE No.
REC’D IN No.
25/1 By bank cheque from P. Jayd, balance of deposit due on sale Bank Chq 602407 CR P10 5609 00 5609 00
2/2 Transferred to file No. 169/XY: Haans from Saltman, to meet TJ 54 5609 00 NIL
balance of deposit due on purchase. Authorised: L. Cussen
2/2/XY

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 1.17.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Specific Trust Entries

From time to time, adjustments and amendments may have to be made to the trust accounts
to take account of:
• cancelled cheques;
• stale cheques;
• dishonoured cheques;
• stop payment on trust account cheques;

The following notes deal with these specific trust entries.

Stale Cheques
A cheque becomes “stale” fifteen months from the date on which the cheque was drawn and
normally will not be paid by the Bank after that time.

In practice it is wise to follow up cheques with the payees if those cheques have not been
presented within three months from the date of drawing as it is possible that they have
been mislaid or not received.

If enquiry indicates that a cheque has gone astray, give a “Stop Payment” notice to the
Bank, write back the unpresented cheque in your trust books of account and then issue a
replacement cheque.

The method of recording such a cheque is to make a “(bracketed)” entry in the Trust
Account Payments Cash Book, (as they are deductions from the payments for the month),
and then to credit the client's account. The issue of a replacement cheque follows the
normal procedure for the drawing of a cheque.

Cancelled Cheques
The cancellation of cheques after issue is treated in the same manner as stale cheques.
Follow the procedure above. (See following page for further information should this problem
arise)

Where the cheque is cancelled at the time of writing:

1. Staple the actual cancelled cheque to the rear of the cheque butt.

2. Do not destroy the cancelled cheque keep it for Audit purposes. Deface the magnetic
code on the bottom of the cheque so that it cannot be used.

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 1.17.2

Staple the actual cancelled cheque to the rear of the cheque butt.

210950

Date 5/3/XY 5 / .3 / XY
Payee Collins & Co. Pay Collins & Co. Trust Account __________________________________________ Or Order
Balance of deposit. the sum of Seven thousand dollars
Johnson from Browny
170/XY
$ 7,000.00
Fwd $ TRAINING PURPOSES ONLY
Chq $ 7000.00
LEO CUSSEN LAW PRACTICE TRUST ACCOUNT L. Cussen
Bal $
210879

XXXXXXXXX
"REMOVE MAGNETIC CODING" (tear out or lines through)

Should you wish to cancel a cheque already send:

1. Contact the Payee.

2. Advise your bank and complete the Bank’s required procedure.

3. Write the cheque back as described on page 1.17.1.

EXAMPLE: The following accounting procedure should be used for writing back
"cancelled" cheques.

TRUST ACCOUNT CASH PAYMENTS BOOK

For Month Ending December 20XZ Page 21
Date Chq. No. Client and File Purpose of Paid To Amount
Type of Matter No. payment $ c
29/12 210950
Writing back of Cheque Number
210950 drawn 5/3/XY which
is cancelled because issued
purchase did not proceed
Johnson from Browny - file (7000 000)
170/XY

NB. The Cheque written back should be credited

to the Original ledger card from which it was
debited.

© Leo Cussen Institute f:\2013\PTC\Accounts c2

CLIENT Johnson, Glenys Lane MATTER Purchase of 53 Red Drive, Daylesford FILE NO. 170/XY
ADDRESS 57 Chople Street East StKilda OTHER PARTY Browny D.W.

TRUST ACCOUNT
DATE PARTICULARS FORM CHQ. TRUST JNL DEBIT CREDIT BALANCE
20XY MONEY No./REC. No. PAGE No.
RECEIVED IN
Carried Forward 7000 00
5/3 To Collins & Co Trust Account preliminary deposit on purchase Cheque 210950 TP23 7000 00 NIL

29/3 Writing back cancelled chq 210950 210950 TP23 (7000 00) 7000 00
(write back see TP page 23): purchase did not proceed

1.17.3
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 1.17.4

Stop Payment
Stopping payment of a trust cheque is a very serious step and should not be done without
very good reason.

Examples could include:

(i) fraud;
(ii) over-drawing an individual ledger (but this should not happen if trust accounts are
properly run);
(iii) on bona fide instructions from a client.

Unclaimed Moneys – Dormant Balances

The Legal Services Board requires a law practice to list in the Statement of Trust Money
(form Trust 5 – LPR 3.3.46) details of dormant balances: including date of last transaction
and the reason for no change (see CRMs p.1.24.1).

Any trust moneys ledger balances that remain dormant for 12 months or more need to be
recorded in an Unclaimed Moneys Register, pursuant to the Unclaimed Moneys Act 1962.

The balances should be cleared from the books by recording to the register and transferring
the money to the Registrar of Unclaimed Money (the State Trustees Limited has been
appointed as the Registrar of Unclaimed Money by the Government).

Section 3.3.20 LPA permits a law practice or approved clerk to pay to the Registrar of
Unclaimed Money for the credit of the Consolidated Fund those moneys in respect of which
the law practice or approved clerk is satisfied that the person entitled thereto cannot be
ascertained or located. This Section also makes provision for the law practice or approved
clerk to deduct from any balance being transferred an amount to cover reasonable costs and
expenses of making enquiry and searching for the person entitled.

Payment to the Consolidated Fund in these circumstances is made mandatory and there are
penalty sanctions imposed for non-compliance with the provisions of the Unclaimed Moneys
Act.

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 1.18.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Statutory Deposit

The Statutory Deposit is governed by Division 6 of Module 3.3 LPA.

Every law practice in Victoria must keep deposited with the Statutory Deposit Account a
specified amount roughly 70% – s. 3.3.63(1) LPA.

The section expresses the formula for calculating the required amount to deposit as:

0⋅7 (A + B)
Where:
A is the lowest daily balance of the trust account of the law practice or
approved clerk at any time during the previous quarter;
B is the amount held on deposit with the Board under this Division on account
of the law practice on the last day of the previous quarter.

If the amount calculated in accordance with the formula in respect of any quarter is less than
$10,000, the required deposit amount is zero – s.3.3.63 (2) LPA.

The Board determines the amount of the required deposit in respect of a quarter as soon as
practicable after the end of a previous quarter and must notify the law practice or approved
clerk as soon as practicable after determining it – s.3.3.65 (1) & (2) LPA.

The law practice or approved clerk must deposit the required amount in respect of a quarter
on or before the 21st day of the first month of the quarter – s.3.3.65 (4) LPA.

The amount held on deposit by the Board is held on trust by the Board and is repayable on
demand – s.3.3.66 (1) LPA. Interest from this deposit is paid to the Public Purpose Fund
administered by the Legal Services Board to fund Legal Aid Victoria and other public
purpose fund activities.

Any amounts repaid by the Board must be deposited in the recipient’s trust account
– s.3.3.66 (3) LPA.

This Division does not apply to controlled money accounts – s.3.3.67 LPA.

If the law practice or operates more than one general trust account then this Division applies
separately in respect of each trust account – s.3.3.69 LPA.

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How to Record the Statutory Deposit in the Trust Account

It is recommended that a notation be made and kept with the ledger cards indicating what
moneys are in the Statutory Deposit Account. This assists the law practice or approved clerk
by reminding them of that deposit when the monthly reconciliation is done pursuant to
Reg. 3.3.19 LPR.

Remember then that the trust account balance consists of the bank account and the
Statutory Deposit. Thus, when reconciling monthly, the Statutory Deposit has to be added
from the total of the Bank Reconciliation.

Procedure
Visit the Legal Services Board website at www.lsb.vic.gov.au and go to the Forms section.
Locate the Trust Form “Information Sheet – Transferring funds from your Statutory Deposit
Account to your Trust Account” to read about statutory deposit accounts and the exact
procedure of depositing and withdrawing money from the SDA that is maintained with
Westpac Bank.

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 1.19.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

The Register of Investments

Note

This is a compulsory trust account register which must be maintained ready for use whether
or not the law practice has any investments to be recorded.

The Register is part of your trust records and is subjected to audit.

Reg. 3.3.30 Register of investments

(1) This regulation applies if trust money referred to in section 3.3.3(3) of the
Act is invested by a law practice for or on behalf of a client, but this
regulation does not itself confer power to make investments.
(2) The law practice must maintain a register of investments of trust money.
(3) The register must record the following information in relation to each
investment—
(a) the name in which the investment is held;
(b) the name of the person on whose behalf the investment is made;
(c) the person's address;
(d) particulars sufficient to identify the investment;
(e) the amount invested;
(f) the date the investment was made;
(g) particulars sufficient to identify the source of the investment,
including, for example—
(i) a reference to the relevant trust ledger; and
(ii) a reference to the written authority to make the investment;
and
(iii) the number of the cheque for the amount to be invested;
(h) details of any documents evidencing the investment;
(i) details of any interest received from the investment or credited
directly to the investment;
(j) details of the repayment of the investment and any interest, on
maturity or otherwise.
(4) This regulation does not require particulars to be recorded in the
register if the particulars are required to be recorded elsewhere by
another regulation.

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 1.19.2

INVESTMENTS – Reg. 3.3.30

Reg. 3.3.30 – Register of Investments

• Money invested pursuant to s.3.3.3 LPA (i.e. Investment for the ancillary purpose of
maintaining or enhancing value pending completion as opposed to investment for
investment sake) needs to be recorded in a Register of Investments of Trust Money –
Reg. 3.3.30 (1) & (2).

• Details to be kept in the Register of Investment of Trust Money are set out in
Reg. 3.3.30(3).

Note

If details of the money invested are recorded elsewhere in the Trust Accounts (eg: in the
Controlled Money Register) then it does not also have to be recorded in the Register of
Investment – Reg 3.3.30(4)).

An example page from a Register of Investments is on page 1.19.3.

This Register must be kept, whether or not the law practice has any money on investment. If
there are no moneys on investment, note NIL on the Register and the date as at 31 October
each year.

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 1.19.3

FORM TRUST 4 – REGULATION 3.3.30

LEGAL PROFESSION ACT, 2004, SECTION 3.3.3 (3)

INVESTMENT MONEY REGISTER

Note 1: The law practice shall maintain a register of money invested for a client under
section 3.3.3(3) of the Act. This Register is NOT a replacement for the Investment and
Securities Register under the previous Trust Account Practice Rules.

Note 2: If the particulars are required by another regulation to be recorded elsewhere then
this Register is not also required, refer to regulation 3.3.30 (4).

Regulations Particulars

(a) Name in which the Investment is held.

(b) The name of the person on whose behalf the

investment is made.

(c) The person’s address.

(d) Particulars to identify the investment.

(e) The amount invested.

(f) Date the investment was made.

(g) Particulars to identify the source of the

investment money, either a reference to the trust
ledger, the written authority to make the
investment, the cheque number for the amount to
be invested.

(h) Details of any documents evidencing the

investment

(i) Details of any interest received from the

investment or credited directly to the investment

(j) Details of the repayment of the investment and

any interest, on maturity or otherwise

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The Register of Interests

Note

This is a compulsory register which must be maintained ready for use whether or not the
legal practitioner has any companies in which the Legal Practitioner or his immediate
family have an interest and whether or not there are joint ventures or other business
interests between those persons and clients of the legal practitioner. If there are no
entries up to 31 October in each year, then insert "NIL" in to the Register and the R.26
entry ruled off. It is not subject to examination, but an external examiner must
confirm whether or not it has been maintained and whether entries have been made.

Rule 26 Register of Interests

Within the current Regulations there is no mention of a Register of Interests. However,
Sections 3.2.17 and 3.2.18 of the LPA 2004 outline that the previous rules were not repealed
and consequently a Register of Interests must still be maintained.

Rule 26
26. A practitioner shall keep a Register of Interests recording to the extent that the
practitioner is able to obtain the information—
(1) the names of all companies, other than companies listed on the Australian Stock
Exchange or shelf companies which have not traded and are maintained for sale, of which
the practitioner or any member of the immediate family of the practitioner is a director,
shareholder or in which the person has a beneficial interest; and
(2) sufficient details to enable identification of any partnerships, joint ventures, trusts or other
business interests in which the practitioner or any member of the immediate family of the
practitioner has a joint interest with a client of the practitioner.

“Member of the immediate family” includes spouse, child and spouse of a child, and for the purposes
of this definition a person who lives with another person as a spouse, although not legally married to
that other person, shall be deemed to be related to that other person in the same manner as he would
be if he were married to that other person.

Thus, a legal practitioner must maintain a Register to record certain details of the legal
practitioner’s personal financial dealings and interests. This information is not included in
the annual Statement of Trust Money, but it must be available for inspection by the external
examiner or LSB Inspector.

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The information to be recorded is:

* names of companies (other than listed or shelf companies) of which the legal
practitioner or their immediate families are a director, a shareholder or have a
beneficial interest.

* joint ventures or other business interests between those persons and clients of the
legal practitioner.

“Member of the immediate family” is defined as including spouse, child and spouse of a child
and such relationships through de facto associations, r.26(2).

The reason for the introduction of this Register is claims made against the Legal
Practitioner’s Fidelity Fund by clients in respect of losses incurred in circumstances where
legal practitioners have allowed their financial affairs to become enmeshed with those of
their clients. Following is an example of a Register of Interests.

Rule 26(1)

Companies which have not traded and are maintained for sale of which solicitor or
immediate family member is a director, shareholder or has a beneficial interest.

NAME OF COMPANY SOLICITOR OR FAMILY NATURE OF INTEREST

MEMBER INTERESTED

Rule 26(2)

Partnerships, joint ventures, trusts or business entity in which solicitor or member of

immediate family has interest with client.

NAME OF TYPE OF SOLICITOR OR FAMILY CLIENT NATURE OF

ENTITY ENTITY MEMBER INTERESTED INTERESTED JOINT
INTEREST

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Accounts

Register of Powers and Estates

Note

This is a compulsory trust account register which must be maintained ready for use
whether or not the law practice has any general powers of attorney by which s/he may
act solely, or any estates of which the law practice is the sole executor or administrator.

If there are no entries up to 31 October in each year, insert “NIL” in the Register and the
date and rule off.

Reg. 3.3.32 provides that law practices must establish a Register of Powers and Estates to
record:

* details (name of grantor and date) of any general power of attorney whereby the law
practice may act solely after 15 August 1990, and

* details (name and date of death of deceased) of any estate of which the law practice is
the sole executor or administrator.

Reg. 3.3.32 Register of powers and estates in relation to trust money

(1) A law practice must maintain a register of powers and estates in respect of
which the law practice or an associate of the practice is acting or entitled to
act, alone or jointly with the law practice or one or more associates of the
practice, in relation to trust money.
(2) Sub-regulation (1) does not apply where the law practice or associate is also
required to act jointly with one or more persons who are not associates of
the law practice.
(3) The register of powers and estates must record—
(a) the name and address of the donor and date of each power; and
(b) the name and date of death of the deceased in respect of each estate of
which the law practice or associate is executor or administrator.

Reg. 3.3.31 requires the law practice to keep a record of all records and all supporting
information as part of the Practice’s Trust Records.

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This register has been introduced as an aid to detecting defalcations. The information is
subject to inspection by the External Examiner and Inspector. An example of the Register of
Powers and Estates follows:

Reg. 3.3.32(1): Powers

GRANTOR DATE OF POWER SOLICITOR FILE NO. DEEDS
APPOINTED REGISTER NO.
ATTORNEY
COMMENCED CEASES

Reg. 3.3.32(2): Estate

NAME OF ESTATE DATE OF SOLICITOR APPOINTED FILE NO. DATE ESTATE
DEATH EXECUTOR/ADMINISTRATOR ADMINISTERED

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Controlled Money-Division 4 - 3.3 LPR 2005

Trust monies include Controlled Money. Controlled Money is defined in s. 3.3.2 LPA.

“controlled money” means trust money received by a law practice with a written
direction to deposit the money in an account (other than a general trust
account) over which the practice has or will have exclusive control;

Note: see section 3.3.15, which prevents pooling of controlled money. So a

separate account must be opened for each controlled money deposit.

The most common form of controlled money is money given to a law practice with a written
direction from the client that it be placed on interest bearing deposit Controlled money is
regulated under Div. 4 of Module 3.3 LPR.
Note: The investment of client money is a specialised area of practice. Distinguish from
money excluded under s3.3.3 of LPA (money received by a practice as part of an investment
scheme or financial services rather than legal practice).

• Each controlled money account must carry the name of the legal practice and “controlled
money account” and particulars that identify it (Reg 3.3.22).

• A controlled money receipt must be issued (Reg 3.3.23).

• Records of controlled money must be kept for 7 years (Reg 3.3.24).

• Any withdrawal from the controlled money account must be authorised by a principal (or
authorised person in the legal practice) (Reg 3.3.25) with a full record kept.

• The legal practice must keep a register for each controlled money account recording
specified account details and the movement of money in the account (Reg 3.3.26).

• Within 15 days of the end of each month, the legal practice must prepare a statement of
all controlled money accounts held (Reg 3.3.26(8)).

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 FORM TRUST 1 – REGULATIOIN 3.3.26
RECORD OF CONTROLLED MONEY MOVEMENTS
Regulation Particulars
Name of the person on whose behalf the controlled money is held
Address of the above person
Matter name and number
Account name and number
Details identifying the type of account
Interest rate

DEPOSITS WITHDRAWALS
Transaction Receipt Date money Transaction EFT EFT Name of Purpose for Person/s Deposits and Withdrawals Balance
payee which the
date Number deposited number Name of BSB & funds are Effecting or Interest
or, if payment received, or
account Account authorising Received

1.22.2
number to bank, withdrawn withdrawal
person
receiving
benefit $ $ $

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 FORM TRUST 2 – REGULATIOIN 3.3.26
RECORD OF CONTROLLED MONEY MOVEMENTS; OTHER THAN BY EFT
Regulation Particulars
Name of the person on whose behalf the controlled money is held
Address of the above person
Matter name and number
Account name and number
Details identifying the type of account
Interest rate

DATE DEPOSITS WITHDRAWALS

1.22.3
Date of receipt or Receipt Date money Name of payee Purpose for which Person/s Deposits and Withdrawals Balance
withdrawal the funds are
Number deposited or, if payment received, or effecting or Interest
to bank, person withdrawn authorising Received
withdrawal
receiving
benefit
$ $ $

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Deeds Register and Wills Register

Neither the Deeds Register nor the Wills Register are trust books of account.

However, both are essential books of record for a law practice in the normal course of
business.

Deeds Register
This records the receipt and disposal by a law practice of all deeds held by the law practice
for a client.

It will include such things as:

• Certificates of Title
• Leases and Mortgages
• Agreements

These documents are all in the client's name, so they are not recorded in the Investment
Register.

However, they are important documents and a record must be kept of their whereabouts.
Many law practices retain such documents indefinitely on behalf of their clients.

The Register records the whereabouts of the title, normally by reference to a Deed package
which is then stored in a safe or strong-room. The register can be in book form (as per the
following example) or in card form, with a separate card for each document; or maintained
on computer with a hard copy printed out.

Whenever a document is received full particulars must be entered in the register and the
document placed in the strong-room (for Leo purposes, your desk drawer must serve as
your strong-room). When the document goes to a third party under authority from the client,
or the document is returned to the client, either a signature should be obtained in the
Register from the recipient, or a separate receipt, which is kept in the register as proof of
where the deed went to.

Wills
A similar register should be kept in respect of all original Wills kept by the law practice for
safekeeping.

The same procedure in relation to receipt, storage and disposal should be followed.

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DEEDS REGISTER

FILE NAME FILE DOCUMENT DATE RECEIVED FROM WHOM DATE HANDED TO WHOM
NO. & PACKET RECEIVED OVER HANDED

(In (type and (date document (date (to whom the

alphabetical registration acquired and document document was
order) number) number of disposed of) given and in
deeds packet) what
circumstances)

WILLS REGISTER

NAME OF DATE OF WILL NO. OF PACKET DATE HANDED TO WHOM HANDED

WILLMAKER OVER OVER AND WHY

(Name of the (date of the will) (number of packet (date will handed (to whom will
person making the where will stored) over) handed; in what
will - listed in circumstance and
alphabetical order) signature of person
receiving)

EXERCISE 7

Please do exercise 7 page 5.7.1 (onsite Trainees) OR the Learning Environment (online
Trainees). Self assess your answer against the example on p/accounts (onsite Trainees)
or the Learning Environment (online Trainees). Onsite Trainees show your answer briefly
to a consultant who can sign off.

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Reporting Obligations

The Legal Services Board (and its delegate the Law Institute of Victoria) is responsible for
issuing legal practitioners practising certificates.

It is also responsible for the administration and management of legal practitioners trust
accounts, and for keeping a register of legal practitioners and law practices. Legal
practitioners must advise the Legal Services Board (and their external examiner) of
information relevant to their legal practice and trust accounts.

The regulations set out time limits within which a law practitioner must advise the Legal
Services Board:
• of matters relating to its practice;
• prepare statements required in relation to the trust account.

Summary Periodic Obligations:

Within fourteen days – Notify:

∗ The establishing of a general trust account with an ADI;
∗ Any changes to the general trust account;
∗ The closing of a general trust account;
∗ Cessation of practice - Section 3.3.55;
∗ Appointment of External Examiner – Reg. 3.3.41;
∗ Death of a law practitioner - Section 3.3.55;
∗ Termination Generally of External Examiner – Section 3.3.44.

Within one month

∗ Of receipt of trust money, appoint an External Examiner - Reg. 3.3.40(1).
∗ Of the death, retirement, resignation or non-qualification of an External Examiner,
appoint another External Examiner and advise the Board - Reg. 3.3.45 within one
month.

Monthly
∗ Within 15 working days of the end of every calender month prepare a statement
reconciling the balance of the trust bank account with the trust cash book balance. Also
reconcile the balances of the trust ledger cards with the balance of the trust bank
account. The statement should be kept in the trust cash book or some other
appropriate book and retained as a permanent record - Reg. 3.3.19. Prepare a
statement listing controlled money accounts.

Within One Month after 31 October

∗ Prepare, certify and sign a Statement of Trust Moneys as at 31 October in the form
approved by the Board and deliver it to the external examiner and the Board – Reg.
3.3.46 LPR.

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∗ The form for giving details of trust money held is Form Trust 5 – Statement of Trust
Money – law practice. If the law practice did NOT hold trust money in the year, the
practitioner must make and lodge a statutory declaration of trust money not held.
Schedule 1 Form A1 LPR (Reg 3.3.49(a).

By 28 February

∗ Ensure that the External Examiner provides the law practice annual report for the period
ending 31 October of the preceding year in the form approved by the Board, together
with the Statement of Trust Moneys mentioned above by 15 February – Reg. 3.3.48
LPR.

∗ Lodge the external examiner’s annual report to the Board by 28 February for the audit
year ending on the previous 31 October – s.3.3.54 LPA

∗ Lodgement after 28 February consists of a breach of s.3.3.54 LPA – penalty: 120

penalty units.

After 30 April in any year

∗ Lodge application for practising certificate for the following year - Section 2.4.10 LPA.

NOTE: in particular for Leo purposes in relation to Trust Accounts:

The monthly trust reconciliation statements - cash, bank and ledger. For Leo purposes, a
copy must be sent to your External Examiner each month.

Visit the Legal Services website at www.lsb.vic.gov.au/TrustAccounts.htm and view the trust
account forms. In particular:
Form Trust 5 Statement of trust money – law practice
Statutory Declaration if trust money not held – law practice.

Read the information on the website on the requirements of trust accounts.

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Accounts

External Examiner

A law practice that is required to keep a trust account must:

• appoint an approved external examiner (LPR 3.3.40(1));
• notify the Legal Services Board of that appointment (LPR 3.3.41);
• the examiner cannot be terminated without cause (LPR 3.3.42) and must perform
particular duties relating to annual audit of the legal practitioner’s trust account (LPR
3.3.47);
• have the trust account examined by the approved external examiner every audit year
(from 1 November to 31 October). The legal practitioner must cooperate with the external
examiner: provide all information and access;
• ensure the external examiner files the required annual report with the Legal Services
Board each year.

s. 3.3.52 LPA sets out the procedure to be followed for audits by external examiners.

it is the responsibility of the legal practitioner to ensure your trust account is up to date at all
times, and kept in a manner that enables them to be conveniently and properly investigated
or externally examined - s.3.3.25 LPA.

Div. 4 of 3.3 of the LPA 2004 sets out the requirements relating to appointment of an
External Examiner:

Read the Regulations and note the main requirements.

Annual External Examination

By 31 October each year the External Examiner must compare the total credit balance of all
trust ledgers with the credit balance of the bank accounts.

Any deficiencies, whether apparent or suspected, or any substantial irregularity must be

reported immediately by the External Examiner.

Investigations
In addition to examination of your account by the External Examiner appointed by you, the
Legal Services Board inspection teams also inspect law practices’ books from time to time
(Division 3 -Investigations LPA s.3.3.28 – 3.3.50)

The Board may appoint inspectors - s.3.3.28 LPA 2004.

Read Regulations 3.3.28 to 3.3.50 and note the very broad powers of the Legal Services
Board inspectors and the consequences of failure by a legal practitioner to cooperate.

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EXERCISE 8 AND 9

Please do exercise 8 on page 5.8.1 and 9 on page 5.9.1 (onsite Trainees) OR on the
Learning Environment (online Trainees).

Onsite Trainees self assess your answers against the example answers on p/accounts
and please then quickly show your answers to a consultant and have your Exercise
Assessment sign off sheet initialled. Then lodge the Exercise Assessment sign off sheet
(signed and dated by you) in the relevant slot at Registry.

Online Trainees – self assess against the suggested answers in the Learning
Environment. Lodge your completion of Topic Certificate if you have now completed and
submitted all the work for the Accounts Topic.

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Winding up the Practice of a Deceased Practitioner

A large number of practices are operated by sole practitioners. Everyone should be aware of
the problems which arise when a law practitioner dies suddenly or is incapacitated and there
is no surviving partner to carry on the practice. In fairness to the clients and in the interests
of the estate, every sole practitioner should anticipate the possibility of death. There may be
trust moneys in the trust account and a number of pending and possibly very urgent matters
to be dealt with.

Every sole practitioner should ask himself/herself “What will happen to the practice if I am
suddenly unable to conduct it?”

Letters of Administration ad colligenda bona

The law practitioner should find a fellow practitioner who will agree that, if the former were to
die, he/she will apply to the Supreme Court for a grant of letters of administration ad
colligenda bona permitting him/her to carry on the practice pending a grant of probate of the
solicitor’s will. Only a qualified person may apply.

See sections 3.3.55(4) LPA 2004, and if further information is required contact the Legal
Services Board.

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Part

2
Office Accounts and Practice Management

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Office Accounts and Practice Management – Objectives

On completing this part you should be able to:

• list reasons why office accounts must be kept.
• identify the books and records relating to office accounts which must be kept by law
practices.
• properly handle "office account money" and link this to the proper management of your
practice as a profitable business.
• conduct your office account throughout the course in a proper manner.
• recognise the proper management of a legal practice requires monitoring performance
and cash flow.

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Office Accounts

You must distinguish between yourself as a private person and yourself as a law practitioner
for the purpose of accounting.

You must keep your personal finances quite separate from the money which comes and
goes out of your law practice.

Further, the money going in and out of the law practice must be clearly divided into office
account and trust account.

You have already learned about the trust account in Module 1 of these notes and you will
remember that trust money includes all funds received by law practices in the course of or in
connection with practice entrusted to or received by or on behalf of other persons.

Office accounts handle money and transactions relating to the running of the business which
are not trust money. For instance, rent, electricity and other costs of the business, together
with costs and disbursements paid on behalf of a client will be paid out of office. Costs paid
by a client once the matter is completed, or taken from trust at the end of a matter, will also
be paid into office.

Accordingly, the office account serves various purposes:

• To determine whether the business is making a profit or a loss because all income and
outgoings relating to the business will be recorded.
• To show how much money is in the bank at any one time to pay the bills relating to the
business.
• To show how much a law practice has spent by way of disbursements so that the client
can be properly billed and the law practice reimbursed, and show the costs and
disbursements recovered from clients.
• Law practices’ office accounts can be referred to by External Examiners and Inspectors
for examination purposes.
• To provide a record of tax deductible expenditure and profits earned, enabling the proper
completion of the annual taxation return.

So in summary:
• The accounts can be referred to by the Legal Board and your external examiner.
• The accounts can be referred to for tax purposes.
• The accounts detail what a client owes you and what the client has paid.
• The accounts show whether the business is making a profit or a loss.

There are no rules set down as to how to run your office account. However, in order to
produce a set of accounts which fulfil the four (4) requirements listed above, normal
commercial principles must be applied.

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At its simplest, the following should be kept.

1. Receipts

1.1 An office receipt book.

1.2 An office bank deposit book.

2. An office account receipts cash book with details of date, from whom, in relation to
which file, for what.

3&4 Office ledger cards in respect of each client which will split out from the cash receipts
and cash payments book all receipts and payments made on behalf of an individual
client.

5. Office account payments cash book listing all payments made, and including separate
individual columns allowing you to characterise the payment made which will enable
better control to be kept of the running of the business.

6. Office Cheque Book.

Run these books according to the “U curve” set out in the trust accounts commentary. Look
at the office stationery supplied, and note each of the four pages.

If amount received and amount paid out are balanced after each transaction, a law practice
will know at a glance the amount of debit or credit in the office account. In addition, office
accounts should be reconciled at regular intervals with Bank statements.

Refer to the following pages for guidance on how to use the office accounts stationery.

Note

An office account receipt must be issued to the name of your trust account each time you
take costs and/or disbursements from your trust account to your office account (as this is
“from whom" the funds were received).

Note

To pay costs from trust to office:

1. write a trust cheque for the amount payable to xxx Law Practice Office Account (make
all the necessary entries following the U Curve);
2. issue an office receipt for $x being costs and disbursements as per account rendered
X day of Y from xxx Law Practice Trust Account;
3. bank this Trust cheque in your office account with an office account deposit slip and
make all relevant entries in the office books of account.

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Accounts

Office Account Receipts/Payments Cash Book

The Office Account Receipts and Payments Cash Book is designed to help you with your
business bookkeeping to:
• maintain accurate cash records;
• prepare a significant part of the expenditure side of your tax return;
• analyse your expenditure.

Guidance and Use of the Cash Book

The Cash Book consists of 4 pages for each month’s entries. You have been given the
first 4 pages. Download further pages for subsequent months from the Leo system at
p/accounts.

1. The first page relates to receipts.

Details of date, receipt number, file number (if any) description of the receipt, and the
amount received can be recorded in the appropriate column.

2. The second page relates to payments.

Details of date, cheque number, file number (if applicable) description of the payment,
and the amount paid can be recorded.

3. The third page allows the payments recorded on the previous page to be
categorised.

The first column records payments of clients’ disbursements; the second two are for
your drawings from the business (if any) and capital payments in fixed assets or loan
repayments (which you will probably not use in the course).

The remaining columns relate to various business recurrent expenditure and can be
used for monitoring expenditure against budget.

4. The final page allows you to reconcile your office accounts to the bank statement each
month. There is a cash book reconciliation and a bank reconciliation only. (No client
office ledger card reconciliation is required)

Note

You are deemed to have deposited $2,000 of your own money into your office account on
the first day of the course to fund the start of your legal practice. Normally you would issue a
receipt for this. We will not require you to do this.

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OFFICE ACCOUNT RECEIPTS CASH BOOK

For Month Ending __________________________ Page ______

Date Rec. Form Client and Type File Purpose for Received Amount Total Banked
No. Money of Matter No. which received From Per Deposit
Rec’d Voucher
in *
$ c $ c

Receipt No.
from office File no. where Amount
rec. book Clients relates to a file banked
name From
Name of file (if whom
relevant) and received
Date
type of file. Amount in
money
Form of money figures
received
received e.g
cheque, cash,
EFT, etc. Details of what
the money is
received for

TOTAL RECEIPTS FOR MONTH

*THE FORM IN WHICH THE MONEY WAS RECEIVED

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OFFICE ACCOUNT CASH PAYMENTS BOOK

For Month Ending __________________________ Page ______

DATE CHQ. CLIENT AND FILE PURPOSE OF PAID TO AMOUNT

NO./EFT TYPE OF MATTER NO. PAYMENT $ c

Cheque File no. Details of for

no. what payments
is
Amount
Clients
of
Name and
payment
Date type of file
payment
made Name of to
whom
cheque is
payable

TOTAL PAYMENTS FOR MONTH

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ITEMISED OFFICE PAYMENTS

For Month Ending __________________________ Page

______

CLIENT & CAPITAL PAYMENTS BUSINESS EXPENSES

Client Drawings Capital Tel. Cleaning Postage Printing Prof. Subs. Rent Repairs & Other
Disb's & S.Duty Stationery Library Maint.

In this cash book, payments have been categorised into a number of different types. When
details of a payment are entered on the left hand page, the payment can be split into various
categories on the right hand page so that running totals can be kept of the amount spent in the
month and in the year to date on different expenses.

For instance, if the amount spent for client disbursements is unreasonably high and a check of
the receipts shows that no corresponding reimbursement has been received from the client, it
should prompt you to render interim accounts in respect of the files where there is a high
amount outstanding for disbursements.

Pay- Money Money

ments taken paid for
------------------------------ as appropriate -----------------------
made out by capital
for you expense
clients from
profits

Total individual expenses for the month

----------------------------------------------------
Total payments to date plus this month’s payment s for payments for the year to the end of the current month.

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Office Account Reconciliation

Office Reconciliation for month ending ............................... 20 ........

Date Reconciliation Prepared ............................... 20 ........

PREPARED BY ............................................ AUTHORISED BY ..........................................

n CASH RECONCILIATION

Cash Book balance from previous month $

ADD Total Receipts $ ____________

SUB TOTAL $
DEDUCT Total Payments $ ____________
Cash Book Balance at end of month *$____________

n BANK RECONCILIATION

Balance as per Bank Statement $

ADD Deposits not credited $ ____________

SUB TOTAL $
DEDUCT Unpresented cheques $ ____________

Balance as per Bank Account *$____________

Unpresented Cheques

Date Payee Cheque No. Amount

_________
$ _________

* These totals should agree

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Office Account Client Ledger Card

You should maintain a client office ledger card, recording all details of entries made on
behalf of each client, which pass through your office account. The office account client
ledger card is also referred to as a debtor’s ledger. Each time you send a bill of costs to
your client your professional costs must be recorded in the debit column of the ledger and
the running balance adjusted accordingly.

When the client pays their bill, the amount paid is credited to the office ledger and that will
bring it back to NIL.

The following examples are the suggested method of completing the office account client
ledger card.

Remember: As with the trust account you must use a separate ledger card for each file.

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OFFICE ACCOUNT CLIENT LEDGER

(use one page per file)

File No. __________________

(Client File Number)

Client
(Name)____________________________________________________________
(Address)__________________________________________________________
(Matter)____________________________________________________________

Date money Paid to or Receipt Cheque number

paid or received from number issued
received issued

DATE PARTICULARS REC. CHQ. NO. DEBIT CREDIT BALANCE

NO.

Amount of Negative
Cheque Amount of or positive
Receipt balance

OFFICE ACCOUNT CLIENT LEDGER

DGER
(use one page per file)

File No. S1/20XY

Client Smith John and Jennifer
26 Bowen Street, Essendon 3040
Property Purchase - 18 West Street, Nunawading 3131

DATE PARTICULARS REC. CHQ. DEBIT CREDIT BALANCE

20XY NO. NO.
MAR 6 L.T.O. Title Search 1123 7 50 7 50
MAR 10 Yarra Valley Water 1128 36 00 43 50
MAR 10 Vic Roads 1129 13 00 56 50
MAR 10 City Whitehorse 1130 20 00 76 50
APR 16 Our professional costs 400 00 476 50
as per bill rendered X
day of Y
APR 22
APR 22 Rec'd from John Smith 2937 476 50 NIL
C & D to pay bill dated
X day of Y

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Part

3
Trust Statements Rendering Bills and Taking
Costs

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Leo Cussen Centre for Law

Practical Training Course

Accounts

Client Trust Statements Rendering Bills and Taking Costs

Objectives

On completing this part you should be able to:

• compile a trust account statement in compliance with the regulations;
• identify when a trust statement must be given to a client;
• compile a bill of costs that complies with the LPA and the LPR;
• relate the information in the Accounts CRMs to the information in the Costing CRMs and
the Introduction to Work Management and Business Skills CRMs;
• take costs from trust money in accordance with the LPA and LPR;
• provide clients with costs disclosure information at the start of a matter and a regulation
3.4.5 Notification of Clients Rights Form B4 to accompany a Bill of Costs.

Note

The Topic of Costing expands on the billing process. You were introduced to Costs
Disclosure Statement and Notice of Rights on Day1 in Introduction to legal Practice.

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 3.2.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Client Trust Account Statements

Statements regarding receipt or holding of trust money (“Client trust account statements”)
are given to clients to account fully for trust moneys received and paid in connection with that
client’s matter. The statement sets out when and what money is received and sets out when
and what payments are made. It replicates the records you have kept of the money going
into and out of the trust account.

This requirement is set out in LPR 3.3.28.

The trust account statement MUST:

• give details of all trust money received and banked in the trust account and details of
payment out, and any remaining balance in the trust account;
• be given to the client:
- as soon as practicable after completion of the matter to which the trust ledger related;
OR
- on the client’s reasonable request; OR
- asap after 30 June each year (unless 3.2.38(7) LPR applies;)
• separate trust account statements must be given for controlled money, and money held
subject to a power.

Transit money is NOT required by the regulations to be shown on a trust account statement.

Leo Cussen advice is that you include transit money separately on your trust account
statement, and that you give a trust account statement detailing transit money even if
that is the only trust money you handle.

Please read LPR 3.3.28 that sets out the details.

The statement must be accurate, must reflect your trust account entries and the history of
the matter on your file, and must balance. It must include all the information from the ledger
card. Theoretically, you could photocopy your client trust ledger and send that – however,
as a matter of presentation and client relations, we suggest you present the trust account
statement as shown in the following examples.

Example 1: page 3.2.3

Trust account statement showing trust money banked and paid out in relation to a purchase
matter where the clients:
• provide money on account of costs that was then used by the legal practice to pay the
fees for rates certificates and searches;
• provide money for the deposit, that was then sent on to the legal practitioner acting for
the vendor;
• provide some money required for the balance of purchase money at settlement:
$57,400.00 (the remaining money for settlement was probably provided by the Bank that
your client is borrowing from on security of a mortgage to be provided over the property);

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 3.2.2
• the balance of money then remaining in trust is taken in part payment of the account
rendered (once the file is completed and a Trust Account Statement given to the client).

Example 2: page 3.2.4

This is an example of a combined trust account statement and transit money statement.

It is in two parts – the first part is the required trust account statement of trust money
received and banked. The second part is funds received and handed on without being
banked (transit money).

In this example:
• the client instructed their bank to deposit $100,000 into their legal practitioner (your) trust
account on account of balance of purchase money, duty and registration fees, and costs
and disbursements;
• their legal practitioner has drawn cheques for settlement (74,771.60 – bank cheque,
13.40, and 650.00);
• their legal practitioner has paid duty to State Revenue Office of $22,660 and registration
fees of $1,205 to Land Victoria;
• their legal practitioner will then transfer the balance remaining in trust to their office
account in part payment of the bill of costs rendered;
• the transit entry of a bank cheque of $329,565 given direct to the legal practitioner to be
handed over at settlement as the remaining purchase funds is shown separately.

Note

We recommend you follow the format of 3.2.4 when preparing the trust account statement
for your Howard to Farmer Current Matter.

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 3.2.3
TRUST ACCOUNT STATEMENT

File Number / Ledger No. 86417

Graeme and Sophie Johns Purchase from S Nguyen, 63 Severn Street, Burwood South

DATE Chq/Rec PARTICULARS PAYMENTS RECEIPTS

20XY No.CR
/CP Jl P

25/1 CR p5 Cash, from you on A/C of costs and 200.00

disbursements

2/2 CP p5 Paid fees on rate and planning certificates 70.00

Chq xxx (5) to Land Vic

4/2 CR p6 From you, on account of Deposit Payable 77,500.00

Rec xxx on purchase on exchange of Contracts
Sale File

5/2 CP p6 Payment of deposit to Collins & Co legal 77,500.00

Chq xxx practitioners for the Vendor

23/3 CR p7 EFT from Leo Bank at your direction being 57,400.00

Rec xxx part balance of purchase price for
settlement and funds from you

25/3 CP p7 Payment to Leo Bank for bank cheque 57,400.00

Chq xxx payable to S Nguyen handed to Collins &
Co legal practitioners for the Vendor at
settlement

2/4 CP p8 To be transferred to (XXXYou) legal 106.00

practitioners in part payment of bill of costs
dated 23/3/XY
$135,100.00 $135,100.00

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 3.2.4
COMBINED TRUST STATEMENT AND “TRANSIT ENTRY” ADVICE

File Ledger No. 1386

MG and GM FLEMING from AA and LM HONG

X Melva Crescent, St Kilda

DATE Chq/Rec PARTICULARS PAYMENTS RECEIPTS

No.CR/
CPJl P

Funds Received and Banked

20XY

26/06 CR p10 From Leo Bank by electronic transfer 100,000.00

Rec xxy – part balance of purchase money for
settlement, duty, registration fees and
costs

30/06 CP p10 To Leo Bank for bank cheque to AA 74,771.60

Chq xxy and LM Hong – part balance of
purchase money for settlement

30/06 CP p10 To SEW – part balance of purchase 13.40

Chq xxy money for settlement

30/06 CP p10 To A Smith part balance of purchase 650.00

Chq xxy money for settlement

30/06 CP p10 SRO: stamp duty on transfer 22,660.00

Chq xxy

30/06 CP p10 Land Victoria – registration fee on 1,205.00

Chq xxy transfer

06/07 CP p11 To be paid to YOUR solicitors our 700.00

costs as per account dated
28/06/20XY
$100,000.00 $100,000.00

Funds received and handed on without being banked (“Transit”)

29/06 From MG & GM Fleming – cheque to 329,565.00

AA & LM Hong part balance of
purchase money required to settle

30/06 Handed to Smith Solicitors at 329,565.00

settlement

329,565.00 329,565.00

TOTAL $429,565.00 $429,565.00

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 3.3.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Payment of Costs and Disbursements Out of Trust

When can a law practice take costs and/or disbursements out of

trust?

Disbursements
Where money is in trust on account of costs and disbursements it can:
• be used to pay disbursements directly out of trust;
• where a law practice has already paid client disbursements out of the law practice’s
funds (the office account) the law practice can reimburse itself using trust money held on
behalf of that client (Reg 3.3.34(3)(iii) LPR).

This rule makes it quite plain that a law practice may not reimburse the law practice’s office
account from the trust account before the disbursement had been actually paid, and “the
relevant account of the practice” namely the general office bank account must show the
debit of the moneys being paid before any reimbursement can be transacted (Reg
3.3.34(6)).

Disbursements should only appear on the Bill of Costs if they have been paid from the
“Office Account”. Any “disbursements” paid from the trust account should appear
only on the Trust Statement. Please note that this requirement is for Leo Cussen
proposes only, and does not necessarily reflect the way disbursements will be
handled in your future firm. Some firms prefer to include “disbursements” paid out of
the trust account in the bill, so that the client has a complete list of all out-of-pocket
expenses. In addition, costs consultants advise us that when a bill goes to the taxing
master of the Supreme Court for a “taxation”, out-of-pocket expenses paid from trust,
but not appearing in the bill, may not be recoverable, ie may not be awarded by the
taxing master.

Nevertheless, during the course you are asked NOT to include “disbursements” paid
from the trust account, because of the risk of confusion and particularly of overpaying
yourself (by transferring the total in your bill to your office account) and causing a
trust account deficiency.

Professional costs
Where money is held in trust on account of costs and disbursements, the law practice can
take professional costs from that where:
1. the law practice has completed all the work in respect of which it claims legal costs; AND
2. pursuant to Reg 3.3.34 legal costs may be withdrawn in accordance with a costs
agreement, or in accordance with instructions received and the law practice has sent to
the client a request for payment or a written notice of withdrawal (Reg 3.3.34(3));

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 3.3.2
3. the law practice may also withdraw trust money once the client has been sent a Bill of
Costs and the client has not objected to that withdrawal within seven (7) days of the bill
being sent (Reg 3.3.34(4)). thus it is not possible to take costs from the trust account
under Reg 3.3.34(4) until seven (7) days have elapsed from rendering the bill;
4. however, if the law practice gives written notice of withdrawal pursuant to Reg
3.3.34(3)(b)(ii) on the Bill of Costs (see example on page 3.4.3, then that money may be
withdrawn from the trust account immediately, without the need for the 7-days wait under
Reg 3.3.34(4)), provided you have complied with points 1 and 2 on the previous page.

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 3.4.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

The Format of Bills of Costs

You will cover the format of bills of costs in the topic of Costing.

In summary, a bill of costs must be:

• on letterhead;
• addressed to the person responsible for paying it;
• dated;
• describe the matter the bill relates to;
• describe the work in relation to which the bill is rendered so as the client can identify it;
• state the dates between which the work billed was done;
• state the relevant scale on which the work was costed (if relevant);
• list disbursements paid out of office separately from professional costs;
• be signed by an authorised person in the legal practice;
• include a Notification of Clients Rights (Form B4) see p/accounts and the Costing CRMs.

Note

In addition, the legal practice must have complied with the initial costs disclosure
requirement under LPA Module 3.4.

Include on the bill the words “This is a written notice of withdrawal” where there is money in
trust that you wish to draw on for costs: LPR 3.3.34(3)(b)(ii).

Give a trust account statement.

Do NOT take costs before you are entitled to them.

SUMMARY
Note Reg. 3.3.34 allows the deduction of costs from trust money where Reg. 3.3.34 (3)
OR Reg. 3.3.34 (4) has been adhered to:
1. A proper bill of costs has been sent.
2. The work has been done already.
3. A statement of account of trust money received, held and paid (trust account
statement) has been given to the client.
4. No objection has been received within seven days after the client has been given
the bill.

Disbursements can be taken from trust money where the law practice has already paid
them out of office.

A bill of costs must fulfil the requirements listed on page 3.4.1.

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 3.4.2

LEO & CUSSEN

LAW PRACTICES
360 Little Bourke Street, Melbourne 3000
ABN 83 504 264 312

24 March 20XY
A/C 71/4

Mr G. & Mrs L. Johnson

63 Severn Street
BOX HILL SOUTH VIC 3128

BILL OF COSTS File number: XXXX

Purchase from Brown

63 Severn Street, South Box Hill

20XY To our professional charges for acting for you in this matter, including
Feb. 6 perusing Vendors Statement, Contract Note and documents of title,
to Mar. 24 arranging cover note, searching title, preparing and lodging Caveat, making
application for relevant rate and planning certificates, advising you on these,
preparing requisitions on title, perusing (and amending where required) the
formal contract of sale, attending you for signing this, exchanging contracts,
preparing. Transfer of Land, attending you for signature, attending to your
banker’s requirements, arranging settlement, preparing Statement of
Adjustments, attending and effecting final settlement, arranging release of
deposit, reporting to you, attending to Change of Ownership Notices, all other
necessary attendances and correspondence, as per Practitioner Remuneration
Order 20XY: $832.00

Our charge to you: $600.00

Add Disbursements: (Paid out of office account)

Fee on search $ 7.50

Lodging fee on Caveat $ 59.00
Additional fees on rate and planning certificates $ 85.00
$151.50

$751.50

(*)Less amount to be transferred from Trust on completion of the file $751.50

Balance Due: NIL

Leo & Cussen (i.e. Signature of authorised person)

E. & O.E.

(* - if there is money in the trust account that will be appropriated for costs, the following clause should
be endorsed on the Bill of Costs: “This is a written notice of withdrawal”: see Reg.3.3.34(3)(b)(ii)).

NOTE: In practice you must show the GST charged on each disbursement. You will not charge GST
at Leo for Leo purposes. See page 3.4.4.

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 3.4.3
Leo Cussen Centre for Law
Practical Training Course

Accounts

GST and Bills of Costs

Dealing with GST in Bills of Costs

The account to the client will need to state whether the whole bill or items on that bill are
GST inclusive or GST exclusive.

Disbursements will need to distinguish between those paid to third parties as agents for the
client for which GST is not added and other disbursements for which GST is required to be
added.

Another issue is if the account is to serve as the tax invoice for input tax credit purposes it
must satisfy the requirements of the Act and Statutory Rule 245. If the tax invoice is for
more than $1,000 it must state the following information:
• The words "tax invoice" displayed prominently
• The supplier's ABN
• The date of issue of the tax invoice
• The name of the supplier
• The name of the recipient
• The address or ABN of the recipient
• A brief description of each thing supplied
• The quantity of each thing supplied
• The price of the supply
• Whether the price is inclusive or exclusive of the GST

Note that if the business renders bills totalling less than $75,000 per annum it does not have
to charge GST. Check whether the scale of costs is inclusive of GST. If it is, and you do not
charge GST, the Bill should be reduced accordingly.

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 3.4.4

SAMPLE GST BILL

DR to R. J. VINCENT
ABN 68 433 297 950

Tax Invoice / Statement

File Number: XXXX
Mr Michael Nguyen
10 Smith Street
Collingwood

Sale of 706-200 King Street, Melbourne

1 Nov 20XY
to date To my costs in acting on your behalf including taking instructions,
preparation of Contracts, Advice to you on the GST elements, answers to
requisitions, Transfers and adjustments, arranging early release of deposit,
answers to Requisitions of the Purchaser and advice, communications with
your Mortgagee arranging discharges, perusal of Transfer and obtaining
execution by you, perusing letters from the Real Estate Agent, arranging
settlement on your behalf, approval of Settlement Statement, attending to
settlement, all necessary documents, letters, perusals, attendances, skill
and care; my charge to you:

$ 590.00
GST $ 59.00
$ 649.00

Disbursements

Check Search $ 6.45

GST $ 0.64

Title Search $ 13.90

GST $ 1.39

Owners Corporation Certificate $150.00

GST $ 15.00

Copy Insurance Certificate $ 30.00

GST $ 3.00 $ 220.38

Total including GST $ 869.38

With Compliments
R.J. Vincent
5.3.2010

This is a written notice of withdrawal of money held in trust.

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 4.0.1

Part

General Notes on Banking, TFN’s and Related

Matters

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 4.1.0

Leo Cussen Centre for Law

Practical Training Course

Accounts

General Notes on Banking, TFNs and Related Matters

Objectives

At the end of this Part you should be able to:

• distinguish the various types of bank accounts and financial accommodation available;
• operate a cheque account and write cheques in accordance with good practice;
• note the existence of bank charges;
• distinguish a "bank cheque" from a personal cheque, and draw a bank cheque on the
trust account;
• note Tax File Number legislation, and GST applies to legal practices.
• recognise that a legal practice is subject to the Financial Transactions Reports Act 1988
and must report significant cash transactions to AUSTRAC.

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 4.2.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

General Notes on Banking

Banking
Please refer to the resource “Explaining General Banking” on Leo System at p/accounts.
Please read it to refresh your memory on the procedures of banking generally.

PRACTICE NOTE
For your current matter program, you have opened two accounts with Leo Bank:
• your law practice trust account for which you have:
• a trust account cheque book;
• a trust receipt book
• a trust bank pay in book;
• your law practice office account for which you have:
• an office account cheque book
• an office receipt book
• an office bank pay in book

You have deposited $2,000 of your own money into the office account to start you off. So
as at the beginning of the CM program you have a credit balance of $2,000 of your own
money in office. You may issue an office receipt to yourself for this amount, though you
are not required to.

For Leo Purposes

Please print your LDX number on:

• all bank deposit slips lodged with the Bank and the accompanying cheque;

• all cheques you draw from your trust or office account.

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 4.3.1

Leo Cussen Centre for Law

Practical Training Course

Accounts

Bank Cheques

The legal profession functions on the basis of bank cheques being “almost as good” as cash
because they are issued by a bank that has debited the customer’s account before issuing
the cheque so the bank becomes the drawee. However, bank cheques are NOT cash and
they can be dishonoured in limited circumstances.

Procedure for issue of bank cheque from trust account

Bank cheques are often required to “settle” legal matters:
• settlement of a property purchase;
• purchase of a business;
• a civil litigation claim.

A bank will issue a bank cheque on request provided there are cleared funds in the
customers account. The bank transfers the funds from the customer’s account to the bank’s
account – and then issues the bank cheque payable to whom the customer directs, drawn
on the bank.

Method: A cheque is drawn, payable to the bank for the required amount, requesting a bank
cheque to the appropriate third party. Any charge should be debited to your office account.

So, the trust account cheque requesting a bank cheque from the bank should be made
payable as follows:

To Leo Bank Ltd., Leo Branch

for Bank cheque to Roland Bloggs

Eighty Five Thousand dollars

$85,000.00

The bank debits your trust account and issues a bank cheque for the required amount.

Bank Procedure

Issue of Bank Cheque In Exchange For Customer's Cheque

(A Typical Instruction by a Bank to its Staff)
A Bank must guard against the possibility of a person fraudulently obtaining a customer
cheque (whether crossed or not) and presenting it to the Bank to obtain a bank cheque in
exchange. In such an event a Bank would not be protected. Many banks are now
implementing stronger anti-fraud policies for the issuing of bank cheques. For example,
where a bank cheque is payable to the National Australia Bank (“NAB”), it now requires that
bank cheque to be made payable to: “National Australia Bank on account of [full legal name
of account holder]”.

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 4.3.2
A bank cheque will not be issued in exchange for a customer cheque unless the Bank
is satisfied as to the bona fides of the person applying for the bank cheque and the
customer cheque is cleared.

Bank Cheques Dishonoured

To maintain the integrity of bank cheques and ensure that their commercial acceptability is
preserved, bank cheques are dishonoured only in very exceptional circumstances.

The only normal circumstances in which any bank's bank cheques may be dishonoured are:

1. if there has been material alteration to the bank cheque;

2. if a bank cheque has been reported lost or stolen, or

3. if a Court Order restraining payment of the bank cheque is served on the issuing bank.

Only in very limited circumstances will a bank be entitled to dishonour its bank cheque where
funds tendered in payment for a bank cheque have not been cleared. The bank's rights in
these circumstances depend on whether the holder of the bank cheque has given value for
the bank cheque.

© Leo Cussen Institute f:\2013\PTC\Accounts c2

 4.4.1

Leo Cussen Centre for Law

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Accounts

Tax File Numbers

Generally speaking, where income is earned on a bank or similar deposit, tax will be taken
out by the investment body and remitted to the Taxation Department unless a Tax File
Number is quoted in relation to that investment, or the investment is exempt (pensioner,
children under 16 earning less than taxable threshold, non residents and entities not required
to lodge a tax return, eg: charities).

There are occasions when a law practices may be deemed an investment body and subject
to the TFN legislation requiring the reporting of investments and related TFN's, or the
remitting of tax deducted.

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 4.5.1

Leo Cussen Centre for Law

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Accounts

GST

You will learn about GST in the topics of Property and Revenue Law/Taxation.
A legal practice is an entity rendering a service and is subject to GST where the income of
the practice is greater than the GST free threshold, currently $75,000 a year. GST must be
added to the bill and the requirements of rendering a taxable invoice complied with.
You will NOT be required to collect GST on bills you render for the CM program because
your income will be less than the GST threshold.

However, please refer to page 3.4.4 of these CRMs.

© Leo Cussen Institute f:\2013\PTC\Accounts c2

 4.6.1

Leo Cussen Centre for Law

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Accounts

Significant Cash Transaction Reporting

Legislation has been introduced to assist detection of tax evasion and serious criminal
activity (money laundering and drug trafficking).

Legal practitioners are affected by the Financial Reports Act 1988 and must report significant
cash transactions to the Australian Transaction Reports and Analysis Centre (AUSTRAC).

A significant cash transaction is one involving a transfer in coin or paper money of A$10,000
or more.

Visit the AUSTRAC website at: www.austrac.gov.au.

Refer to AUSTRAC Guideline No. 6 “Significant Cash Transaction Reporting Solicitors”

which is in the Publication Tab under Guidelines..

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 4.7.1

Leo Cussen Centre for Law

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What is NOT Trust Money

The following alert reminds law practices that certain money placed with legal practice for
investment is not trust money and a written warning to that effect must be given to clients
where relevant.

RPA Alert.
Regulation. Prosecution . Action.
Alert to all practitioners-from the Legal Services Commissioner and the Legal Services Board

RPA Alert 4, June 2013

New Financial Services and Investments Notification Rules 2013

From 14 June 2013 new rules apply to all law practices and approved barristers' clerks, requiring them to
inform their clients that certain types of funds left in their care are NOT protected trust funds.

The Legal Services Board has made the Financial Services and Investments Notification Rules 2013 which
require law practices and approved clerks to notify clients in writing that money entrusted for:
• Financial services
• investment schemes
• Mortgage financing is not trust money and may, therefore, not be protected by a fidelity or compensation
fund.

These rules are a response to the very high incidence of misunderstanding in the community about money
"entrusted" to a lawyer or clerk. Client money provided for investments or financial services is not protected by
the Fidelity Fund if it is lost or misappropriated. The Fidelity Fund pays compensation to people who lose trust
money as a result of a default by a practitioner or approved clerk.

These new rules are designed to enhance consumer protection while imposing minimal obligations on
Victorian practitioners. Affected clients will now know, upfront the limited protections applying to their money
under the Legal Professian Act 2004 in relation to those non-legal services.'

These rules may be viewed on the Legal Services Board website.

Michael McGarvie
Legal Services Commissioner
CEO Legal Services Board

Contact Us
Phone: (03) 9679 8001
Email: [email protected]

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