Part A – Knowledge Based Assessment Multiple Choice Questions

For each of the following, select the most appropriate alternative. 

Note: Clearly circle or mark your answer. 

When an agent receives trust funds, in what order is the money recorded: 

Receipt book, ledger, cash book,

Cash book receipt book, ledger,

Cash book, ledger, trial balance,

Receipt book, cash book, ledger. 

in the event that a cheque is received that comprises both “trust monies” and “non-trust monies” the licensee must take the following action:

Pay the cheque into the office “General Account” and transfer the Trust

Money to the Trust Account as soon as practicable

Pay the cheque into the office “General Account” and transfer the Trust

Money to the Trust Account within 14 days

Pay the cheque into the Trust account and transfer the non-trust money to the

General Account as soon as the money becomes available

Either (a) or (c) 

Trust money held on behalf of a person is available to: 

Be held by the licensee in a trust account bank account

Be held exclusively for the person

Paid or disbursed to that person or the person nominated by them

To pay licensee’s creditors

(a), (b) and (c) 

The licensee must ensure that a back up copy of all computerised records: 

Is not kept at the licensees business address or office address

Is conducted at least every month

Is kept in a fireproof safe

Is kept in such a manner that any incident cannot affect the records

(a), (b) and (d) 

Within 21 days after the end of each month the licensee must: 

Balance the Trust Cash book for the previous month

Complete a Trial Balance for the previous month

Reconcile the Trust Cash Book to the Trust Bank Statement

Leverage Academy CPPDSM4006A – Establish & Manage Agency Trust Accounts

The licensee must ensure that if a computer system is used to retain trust records that: 

The computer programme cannot delete a ledger account unless the account balance is zero

A record of the deleted ledger account is retained in visible form

A back-up must be made at least monthly

Transactions cannot be reversed, amendments must be made by entering a separate transaction to rectify errors

(a) and (d) only

(a) to (d) 

Trust Monies must be banked: 

Immediately to the Trust account on the same day as receipt

Before the end of the week into the trust account

In person at the bank

By the end of the next business day after receipt

All of the above 

Trust Records must be kept: 

In visible form

At the Licensee’s registered office

By computer

All of the above 

Licensees must ensure that they:

Properly supervise the business carried on by the licensee

Establish procedures ensuring compliance with the Act

Keep trust account documents and records for at least 3 years

Keep trust account documents and records for at least 5 years

(a), (b), and (c)

(a), (b), and (d) 

A trust account receipt issued in respect of moneys received must show the following information (in addition to other information): 

The name of the licensee

The licence number of the licensee

The date the receipt was issued

The words “Trust Account”

The amount of money received in figures only

(a), (c), and (d)

(b), (c), and (e) 

All cancelled receipts and cheques must be recorded in the cash book and ledger. 

True

False                                               

To which Government department does a licensee now have to report details of unclaimed trust money?

Fair Trading

Office of State Revenue

Police Department 

What date is the prescribed day for auditing trust accounts?

30 January

30 September

30 June 

Who must agents notify in writing that a trust account is being opened?

Their solicitor

The agency’s office manager

The authorised financial institution

Fair Trading

(c) and (d) 

Identify where the words “Trust Account” must appear. 

On receipts

Letterhead

All cheques drawn on the trust account

(a) and (c). 

Where must a licensee keep the most recent backup copy of the trust records? 

On your desktop

In the office safe

In such a place that any incident could not adversely affect the backup copy. 

Within what period of time must a licensee notify the OFT in writing after becoming aware that the Trust Account has been overdrawn? 

Within 14 days

Within 5 days.

There is no need to notify the OFT. 

If a purchaser’s deposit is invested in an interest bearing deposit by the agent, who is entitled to the interest accrued on the account? 

The agent

The vendor only

The purchaser only

The purchaser and the vendor in equal shares or as agreed by them.                                               

Who is qualified to audit a trust account? 

A representative of the OFT

Any person nominated by the licensee

a registered company auditor or a person approved by the OFT, and members of a professional accounting body as long as they hold a Public Practising Certificate with one of those bodies. 

By when must a licensee have an audit conducted of his trust account records? 

Within 3 months of the prescribed date, i.e. 30 September

Within 2 weeks

Within 2 months 

What is the purpose of a bank reconciliation? 

A record of monthly transaction history

Cash control measure designed to eliminate known differences between the bank account and the cashbook.

A way to keep in touch with the bank 

When must a bank reconciliation be completed? 

Within 21 days of the end of each month.

At the end of the month.

Within 7 days of the end of each month. 

Why is a source document important? 

Provides written evidence that a transaction has taken place.

Provides the data that is recorded into the accounting system.

(a) and (b). 

What is the legislative requirement for closing a trust account? 

Inform OFT in writing within 7 days

Inform OFT in writing within 14 days

Inform OFT in writing within 21 days

What technique can be used to identify an error in the trial balance?

 Determine difference in totals and look for half of this amount.

Re-check all balances carried to trial balance

Check additions in cashbook and ledgers

Test for reversal of figures in posting – if the difference between debit and credit totals of trial balance is divisible by 9.

All of the above.

When completing a bank reconciliation, if the bank statement is correct but the agency cashbook has errors, where do you make the adjustment? 

On the bank statement

On the cashbook

On the bank statement and the cashbook.