Practice Exercise 5.

1
Ann Litigate had the following trust transactions in the month of June:
Date
# 20** Transaction Amount

1 June 1 Ann received a cheque (#91) from a new client, Jessica Palmer, as $2,500
a retainer deposit in an immigration law matter.

2 June 1 Ann wrote trust cheque #352 on the trust bank account in payment $4,000
of invoice #518 previously sent to Karen Charles. Assume that on
May 30, Charles had a balance of $4,500.

3 June 8 There is an amount of $60 charged to Daniel Pitt for photocopy $60
charges incurred in the preparation of a document brief for use at an
upcoming criminal trial. Invoice #519 was sent to Daniel Pitt, and
Ann wishes to recover the charges for the disbursement from trust
(trust cheque #353). Assume that on May 30, Pitt had a balance of
$1,000.

4 June Louise Forte sent cheque #47 written on her personal bank account $3,130
25 to the firm in the amount of $3,130. Ann deposited the cheque into
the trust bank account and then wrote trust cheque #354 in payment
of invoice #520 for $1,130 and held the balance remaining in trust
as a retainer.

Review the sample worksheet below and then, using the worksheets provided:

a. Prepare the appropriate trust bank journal entries to record the transactions shown above.
b. Post the entries to the client trust ledgers.
c. Post the totals to the appropriate general ledger accounts.
d. Complete the client trust listing at the end of the month. Does the listing match the amount in
account #215 (Trust Funds Owed)?

Sample worksheets
On June 18, Paralegal receives $1,500 as a retainer from a new client, Anthony Johnston.

Ann Litigate, Paralegal TJ1

Trust Bank Journal

Trust Bank Account

Date Received From/ File Method of
Client/Description
20** Paid To No. Payment
Dr. Cr.

June 18 Rec. Anthony Johnston 01 Johnston, retainer Cheque 1,500

31 Totals 1,500 0

(115) (115)
 Sample client ledger after posting

Ann Litigate, Paralegal

Client Trust Ledgers

Account: JOHNSTON, Anthony File No. 06

Client Trust Ledger

Date Received From/Paid To Disbursements Receipts Balance in

20** Explanation (Dr.) (Cr.) Trust

June 18 Retainer 1,500 1,500

Answer a:
Using a single trust bank journal for both receipts and disbursements:

Ann Litigate, Paralegal

Trust Bank Journal TJ1

Date Received From/ File Method of Trust Bank Account

Client/Description
20** Paid To No. Payment Dr. Cr.
June 1 Rec. Jessica Palmer 06 Palmer, retainer re: chq. 91 2,500
immigration matter
1 A. Litigate 04 Charles, re: invoice #518 chq. 352 4,000

8 A. Litigate 03 Pitt, re: invoice #519 chq. 353 60

25 Rec. Louise Forte 08 Forte, retainer chq. 47 3,130

25 A. Litigate 08 Forte, re: invoice #520 chq. 354 1,130

30 Totals 5,630 5,190

(115/215) (115/215)

Example using two separate trust journals for receipts and disbursements:
Trust Receipts Journal—TRJ1: Because L. Forte provided only one cheque, in part for the payment
of an invoice and in part to be used for a retainer in the amount of $2,000 ($3,130 – $1,130), the entire
cheque must be deposited into trust and then a disbursement from trust can be made for the portion
in satisfaction of the invoice.

Trust Receipts Journal TRJ1

Method of
Date 20** Received from PR Description Amount
Payment
June 1 Jessica Palmer 06 Retainer re: immigration matter chq. 91 2,500
 25 Louise Forte 08 Retainer chq. 47 3,130

30 Total 5,630

(115/215)

Trust Disbursements Journal—TDJ1: The date for disbursement will depend on the day Ann Litigate
transfers the amount from trust (e.g., by a cheque written from trust and payable to Ann, to be
deposited into the general bank account) as payment for an invoice or reimbursement of client
disbursement expenses.

Trust Disbursements Journal TDJ1

Method of
Date 20** Paid to PR Description Amount
Payment
June 1 A. Litigate 04 Paid invoice #518 Karen Charles chq. 352 4,000
8 A. Litigate 03 Daniel Pitt, re: invoice #519 chq. 353 60

25 A. Litigate 08 Louise Forte, re: invoice #520 chq. 354 1,130

30 Total 5,190

(115/215)
Answer b:

Ann Litigate, Paralegal

Client Trust Ledgers

Account: PALMER, J. re: Immigration File No. 06

Client Trust Ledger

Date Received From/Paid To Disbursements Receipts Balance in

20** Explanation (Dr.) (Cr.) Trust

June 1 Retainer 2,500 2,500

Account: CHARLES, K. File No. 04

Client Trust Ledger

Date Received From/Paid To Disbursements Receipts Balance in

20** Explanation (Dr.) (Cr.) Trust
May 30 Balance held in trust 4,500

June 1 Ann Litigate, payment on invoice #518 4,000 500

Account: PITT, D. File No. 03

Client Trust Ledger

Date Received From/Paid To Disbursements Receipts Balance in

20** Explanation (Dr.) (Cr.) Trust
May 30 Balance held in trust 1,000

June 8 Invoice #519—photocopy charges 60 940

Account: FORTE, L. File No. 08

Client Trust Ledger

Date Received From/Paid To Disbursements Receipts Balance in

20** Explanation (Dr.) (Cr.) Trust

June 25 Retainer 3,130 3,130

25 Payment on invoice #520 1,130 2,000

Answer c:

Ann Litigate, Paralegal

General Ledger Accounts

Trust Bank Account Account No. 115

Date
Explanation PR Debit Credit Dr./Cr. Balance
20**

May 30 Opening balance 3 Dr. 5,500

June 30 Totals for June TJ1 5,630 5,190 Dr. 5,940

Trust Funds Owed Account No. 215

Date
Explanation PR Debit Credit Dr./Cr. Balance
20**

May 30 Opening balance  5,500

June 30 Total from client listing TJ1 5,630 5,190 Cr. 5,940

Answer d:

Ann Litigate, Paralegal

List of Balances Owed to Clients
June 30, 20**

File No. Account Balance Owed

06 PALMER, J. re: Immigration 2,500

04 CHARLES, K. 500

03 PITT, D. 940

08 FORTE, L. 2,000

Total Owed to Clients 5,940

Yes, the listing matches the amount in account #215 (Trust Funds Owed).