RECORD-KEEPING IN A PARALEGAL PRACTICE

Part II Books and records for standard transactions

What is a source document? An original document on which a transaction is recorded Evidence of the occurrence and value of a transaction The source of information about transactions that are entered into your books and records Should be prenumbered

Bookkeeping in a Paralegal Practice Part II

What is a journal? A book of original entry Record of all parts of a trx in one place, in chronological order Entry: The record of a trx in a journal Journalizing: Making entries in a journal Each journal entry should reference a source document

Bookkeeping in a Paralegal Practice Part II

What is a ledger?
A book where transactions are organized and recorded into individual accounts Posting: Transferring information from the journal to accounts in the ledger Account: A page in the ledger changes resulting from trxs are recorded for a particular item on the balance sheet ?? Why are ledgers useful?
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Entering transactions on your books

Transactions evidenced by source documents
Journal Journalizing Posting Ledger

By-law 9, s. 22 requires that your records be current and up-to-date. Accounting software posts transactions as they are entered, in compliance by By-law 9, s. 22.

Minimum requirements for trust books and records (By-law 9, s. 18)

Detailed duplicate trust deposit slips (s.18(10)) Trust receipts journal (s.18(1)) Trust disbursements journal (s.18(2)) The trust journals may be combined in one book. Clients trust ledger (s.18(3)) Trust transfer journal (s.18(4)) Trust bank comparison (s.18(8))

Bookkeeping in a Paralegal Practice Part II

Minimum requirements for general books and records (By-law 9, s. 18)

Detailed duplicate general deposit slips (s.18(10)) General receipts journal (s.18(5)) General disbursements journal (s.18(6)) The general journals may be combined in one book. Fees book (s. 18(7)) For business accounting purposes, you will also maintain a clients general ledger to track receivables

Bookkeeping in a Paralegal Practice Part II

Other financial records

Source documents (cancelled cheques, detailed duplicate cash receipts, etc.) (s.18(10),(11)) Duplicate cash receipts book (s. 19) Valuable property record (s.18(9); rule 3.07) Trust transfer journal (s. 18(4))

Bookkeeping in a Paralegal Practice Part II

Maintaining financial records

Your financial records must be permanent records (By-law 9, s. 21) ?? If your financial records are entered and posted by hand, how do you ensure that they are permanent? ?? If you use spreadsheet programs or accounting software, how do you ensure that your records are permanent?

Bookkeeping in a Paralegal Practice Part II

Maintaining financial records

Your financial records must be entered and posted so as to be current at all times (By-law 9, s. 22(1)) ?? What is an exception to the rule that financial records must be kept current?

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Trust Transfer Journal (s. 18(4))

Used to record transfers of trust funds from one client matter to another client matter. The transfer will be posted to the ledger accounts for the client matters affected by the transfer

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Trust transfer of funds from one clients trust account to another clients trust account
Obtain the transferring clients written instructions to transfer the funds Enter the transfer in the trust transfer journal Post the transfer to the client accounts affected by the transfer in the clients trust ledger

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Trust transfer Same client, 2 different matters

By-law 9 does not require you to enter the transfer in the trust transfer journal You should obtain the clients written instructions to transfer the funds You should consider confirming the instructions in writing The transfer will be posted to the ledger accounts in the clients trust ledger for the client matters affected by the transfer

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Valuable property record By-law 9, s. 18(9), Rule 3.07

Records all valuable client property other than money held in trust for clients
Paralegal Firm Name Valuable Property Record
Client Description of property D.Lafrance painting Fleur de lion Date received Received from Value Delivered to Date of delivery

Krull, Felix

5 Jan 20

Krull, Felix

$1,500.00

Krull, Felix

7 Jul 20

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Client property that should be included in the valuable property record

Instruments registered in paralegals name in trust

Stocks, bonds, other securities payable to bearer

Jewellery, paintings, furs, collectors items, other saleable valuables Any property that you can convert to cash

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Trust Comparison (By-law 9, s. 18(8))

Must be done on or before the 25th day of the month following the month covered by the trust bank statement or passbook ?? What is a bank statement ?? A printed list of transactions on the general account and the mixed trust account for a one-month period Alternatively, you can use general and trust passbooks Passbooks can be updated electronically
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Why is the trust comparison required?

The trust bank statement may not reflect all transactions on the trust account for the monthly period If properly maintained, the trust bank journal and the clients trust ledger will be more current than the bank statement or passbook Example: A trust cheque that was entered in the trust bank journal may not be cashed until after the month-end so it shows up in the journal and the clients trust ledger for the client matter, but is not reflected on the trust bank statement
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Why is the trust comparison required?

The clients trust listing, trust bank reconciliation and trust comparison enable you to account for any discrepancies between the balance on the trust bank statement, and the trust balance according to the clients trust ledger, and correct any errors. Shortages in the trust account must be corrected immediately. Bank or posting errors must be corrected before the end of the next month.
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See Ethics text, pages 250-2 for the steps in completing the trust bank reconciliation, client trust listing, and trust comparison We will explore trust comparisons in more detail later in the course

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REMINDER: Trust and general accounts The general account is your operating account No client money should be deposited to your general account (By-law 9, s. 7) The trust account is for client money only No money belonging to the paralegal firm should be deposited to the trust account (Bylaw 9, s. 8)
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REMINDER: Permitted methods of paying yourself from trust for proper disbursements or legal services that have been billed to the client (By-law 9, s. 10) By trust cheque payable to the licensee By transfer from the mixed trust account to the general bank account By electronic transfer

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BOOKS AND RECORDS FOR SOME STANDARD TRANSACTIONS IN A PARALEGAL PRACTICE

The following slides illustrate typical transactions in a client matter Only transactions where compliance with Bylaw 9 is required are described You will maintain additional books and records for regular business purposes

Mixed trust account Deposit money retainer to trust

Source document Journalize to Detailed duplicate trust deposit slip Trust receipts journal Reference to source document

Post to
??

Clients trust ledger

If the clients cheque is not certified, what must you consider?
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General account Pay a proper disbursement/expense in a client matter

Source document General cheque

Journalize to

General disbursements journal Reference to source document

Post to

Clients general ledger

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Invoice client for fees and disbursements Money in trust

Pre-bill to be reviewed and approved by paralegal Final invoice must show amount transferred from trust to general If there is money left in trust after the invoice is paid, invoice must show
0 balance owing by client, plus the balance still held in trust on a separate line

If there are insufficient funds in trust to pay the invoice in full, invoice must show
amount transferred from trust, plus the balance owing by the client to the paralegal on a separate line

Final invoice must be signed by paralegal

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Invoice client for fees and disbursements Disburse money from trust
Invoice
To be signed by paralegal Post invoice to clients general ledger Enter invoice in fees book or file copy in chronological file of billings Trust cheque payable to licensee

Source document
Journalize to Post to

Trust disbursements journal Reference to source document

Client matter account in clients trust ledger

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Invoice client for fees and disbursements Deposit trust cheque to general account Detailed duplicate general Source document deposit slip General receipts journal Reference to source document Client matter in clients general ledger
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Journalize to

Post to

?? What if there is a balance owing on the invoice after payment from trust ?? The balance still owing must be shown on a separate line on the invoice When the client pays the balance owing, it is your money. Why??
?? Which account do you deposit the clients payment to, and what books and records must you complete ??

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Invoice client for fees and disbursements No money in trust

Pre-bill must be reviewed by paralegal Invoice must be signed by paralegal Enter invoice in fees book, or File copy of invoice in the chronological file of copies of billings Post invoice to clients general ledger

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Invoice client for fees and disbursements No money in trust Books and records for client payment of invoice
Detailed duplicate general Source document deposit slip General receipts journal Reference to source document

Journalize to

Post to

Clients general ledger

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Deposit settlement funds to trust Precondition The retainer agreement contains a provision that any settlement funds payable to the client or by the client shall be paid to the licensee in trust
Source document Journalize to
Detailed duplicate trust deposit slip Trust receipts journal Reference to source document Clients trust ledger
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Post to

Paying your invoice from settlement funds payable to your client

Preconditions: The retainer agreement contains a provision that any settlement funds payable to the client or by the client shall be paid to the licensee in trust The retainer agreement contains a provision that that outstanding fees and disbursements billed to the client may be paid in full from settlement funds payable to your client; and Full and final releases have been signed by all parties
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Paying outstanding fees and disbursements from settlement funds Invoice the client and disburse money from trust
Invoice
To be signed by paralegal Post invoice to clients general ledger Enter invoice in fees book or file copy in chronological file of billings Trust cheque payable to licensee

Source document
Journalize to Post to

Trust disbursements journal Reference to source document Client matter account in clients trust ledger

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Paying outstanding fees and disbursements from settlement funds Deposit to general account Detailed duplicate general Source document deposit slip General receipts journal Reference to source document

Journalize to

Post to

Clients general ledger

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Balance owing to you after your invoice has been paid from settlement funds
The balance owing should appear in a separate line on the invoice ?? When the balance owing is paid by the client, which bank account is it deposited to ?? ?? What books and records must you complete for the transaction ??

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Balance owing to client after the invoice is paid out of settlement funds
The balance owing on a separate line on the invoice should state 0 The amount of settlement funds remaining in trust should be stated on a separate line on the invoice The settlement funds should be paid out to the client or otherwise dealt with pursuant to the clients written direction ?? What books and records must you complete if you pay the settlement funds out to the client?
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