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Law Institute of Victoria – Trust Accounting Blog - Trust Accounting Requirements

Law Institute of Victoria – Trust Accounting Blog - Trust Accounting Requirements

By Law Institute of Victoria

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Trust Accounting Requirements

The requirement to maintain trust accounting records is contained in the Legal Profession Uniform Law Application Act 2014 (“the Act”) and the Legal Profession Uniform General Rules 2015 (“the Rules”).

The body responsible for the regulation of practitioners in Victoria is the Legal Services Board.

Trust accounting systems that may be used by practitioners are manual or computerised. All requirements of these systems of accounting are covered by the Act and the Rules.

Practitioners wishing to receive trust money must hold a practising certificate that authorises them to receive the money. This practising certificate may be obtained after the practitioner has successfully completed a short course and applied for an upgrade in their practising certificate.

At all times the practitioner is responsible for trust monies and the trust accounting records and should be able to provide explanations to their examiner or investigator as to queries on monies or records by these parties.

It is recommended that the practitioner acquires a working knowledge of the trust bank account reconciliation so that it can be reviewed and signed off at the end of every month.

Timely processing of transactions and production of required reports is essential for good practice management and compliance with the Act and the Rules, e.g. printing or availability at the end of each month of, trust receipts and trust payments journals, trust bank account reconciliations, trust trial balances, and registers of controlled money. These reports should be prepared in line with the timelines included in the Rules.

It should be remembered that trust bank account reconciliations should be completed on the last day of each month, not one or two days either side of the last day of the month to ensure strict compliance with the Rules.

There are three steps in the completion of the reconciliation:

  • The cash book reconciliation,
  • The bank reconciliation, and
  • The trust ledger reconciliation.

All three of the totals in these steps must agree for the reconciliation to be correct at the end of each month.

Each trust bank account must be externally examined yearly by a suitably qualified person appointed in accordance with the Rules. The examination year runs from 1 April in one year to 31 March of the following year.

A final examination is also required when a practitioner ceases to be authorised to receive trust money.

Practitioners are required to deposit funds into the Statutory Deposit account when requested by the Legal Services Board. These deposits and withdrawals from the Statutory Deposit account should be recorded as trust payments and trust receipts from the trust bank account. A trust ledger should be maintained for this deposit with the Legal Services Board (LSB) as the client and the Statutory Deposit Account (SDA) as the matter. This deposit will be a debit in the SDA trust ledger. The debit in this trust ledger account (if any) is then deducted from the total of all other trust ledger accounts at the end of each month.

This article was contributed by Peter Dosser. Peter provides accounting support to users of LIV’s Trust Accounting Online Software. If you would like to learn more about subscribing to LIV’s Trust Accounting Online Software, visit https://ta.liv.asn.au, email tahelp@liv.asn.au or call 03 9607 9463.


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