Establish and Manage Trust Accounts: CPPDSM4006A Assessment 1

This assignment solution addresses the requirements of CPPDSM4006A, focusing on establishing and managing trust accounts within a property management context. Part A covers knowledge-based questions related to legislative requirements, internal controls, and audit procedures. It explores topics such as identifying relevant legislation, ensuring compliance, implementing security measures, and understanding the roles of auditors. Part B presents a practical activity where the student, acting as the property manager for Evansdale Realty, completes trust accounting records. This includes completing a Trust Receipt and Payment Journal, Trust Ledger, Trust Trial Balance, and a Trust Bank Reconciliation based on a provided scenario and bank statement. The solution demonstrates the ability to apply theoretical knowledge to real-world scenarios, ensuring accurate record-keeping and compliance with regulations.

CPPDSM4006A: Assessment 1Establish
and manage trust accounts
What you have to do
 This unit of competency specifies the outcomes required to establish and manage
trust accounts in an agency context. It includes reviewing agency accounts for
compliance with trust account requirements, establishing and managing trust
accounts, maintaining records of trust transactions, and monitoring and reviewing
trust accounts.
 You must complete Part A and Part B.
 Do not submit project 2 until you have received a pass result and feedback from
your teacher for this project .
Using the relevant legislation in your State answer the following questions:
Part A – Knowledge questions
1. Where would a licensee find the legislative requirements to establish and maintain a
trust account?
 Trust Accounts Act, 1973
 Property and Stock Agents Act, 2002
2. How does the licensee ensure that the requirements are kept continuously update to
date?
 The licensee has to check the legal and legislation requirements of the trust
continuously to ensure that they are up to date.

3. What policies and procedures could a licensee establish to ensure that their
employees understand and comply with the trust accounting requirements and key
principals of accounting in their daily practice?
 Continuous supervision and monitoring of the seniors who have complete knowledge
of the trust accounting requirements
 Training of the employees to enable them understand the different requirements and
compliance with accounting requirements.
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4. When selecting a computerised trust accounting programme for an agency the
licensee should ensure that it meets the compliance guidelines. What makes the
software compliant in the property industry?
 Compliant with PSBA & PSBA Regulations 2014
 Ability to display and enter Unique id numbers for every trust
5. Identify 2 (two) source documents and explain their purpose in the trust accounting
process.
 Receipt of trust money on behalf of others for the purpose of recording the amount of
money received.
 Other receipts of trust account transactions for he purpose of recording and having
evidence
6. What are the 2 methods of withdrawing/disbursing money from a trust account.
 By cheque
 By electronic transfer
7. Who can sign cheques or effect electronic fund transfers from a trust account?
 Lawyer in charge of trust
 Authorised signatory to trust account
8. How can trust accounting records be maintained so that they can be conveniently
and properly audited?
 Trust account should be maintained in compliance with the PSBA and other relevant
legislations. They should be maintained properly as the other accounts by the person
managing the trust account for proper audit.
9. How long must trust accounting records be retained?
 Trust accounts are to be retained for five years after they were obtained or prepared
or
 5 years after completion of transactions or act to which it related , whichever is later.
10. Where must all transfers between accounts be recorded when they are not effected
by cheque or electronic funds transfer?
 In the easy to use accounting software
 In the accounting records maintained by the licensee
11. What are the licensee’s duties relating to the preparation a trial balance and bank
reconciliation in the trust accounting process?
 To ensure that the trust account reconciliation are done at close of every month.
 It is completed within the 10 working days after end of every month
 Signed, verified by agent
12. How does the licensee ensure the security and confidentiality of their client’s funds?
 Though proper security arrangements and audit licensee could ensure proper
protection and confidentiality of the clients
 All the information should be kept in authorised room or systems where unauthorised
access is not allowed.
 Property security arrangements are there for protection of client information
 Timely audits that there is no fraud or errors.
13. What is the purpose of an audit on the trust account?
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 Purpose of the audit of trust account is of reporting whether records related to the
trust monies are kept properly, whether there are any discrepancies in the trust
monies, whether trust accounts are in compliance with legislations.
14. What are the duties of an auditor in relation to the trust account?
 To report whether all the records relating to trust money are kept and it is in
compliance with all legislations
 To report on the errors or discrepancies identified in the records or trust monies.
15. How can a licensee keep themselves and agency staff up to date with knowledge
and understanding of the relevant legislation for trust accounting?
 The licences through continuous checking over the legal announcements and
pronouncements from relevant legislations can keep the employees up to date.
 Environment and policies should be established where everyone has to be aware of
the new notifications and laws.
16. “Agents cannot rely solely on statutory appointed auditors to identify theft and fraud
in their agency. Misappropriation can occur well before an annual audit is
performed”. What measures or internal controls can a licensee put in place to prevent
misappropriation of trust funds?
 Checking the cash receipts at regular intervals
 Ensuring funds are issued after proper authorisation
 Work of every person is checked by other
 Surprise checks of the accounts and systems of the employees could be done.
 No transaction should take place without proper authorisation.
17. How does the licensee keep clients informed of transactions in the trust account?
By informing the client before any transaction occur in their accounts. They have to
inform the client about new transactions or events if are to be taken through their
accounts.
Part B - Practical activity
 You have decided to start a property management section in your business
‘Evansdale Realty ‘and are using a manual system until it gets enough clients to
purchase a computerised software programme.

 You are to complete the appropriate books of account for the dedicated Property
Management trust accountto ensure an accurate record of client’s transactions,
based on the following scenario:
 Correctly complete the Trust Receipt and Payment Journal (Cashbooks)
 Correctly complete the Trust Ledger and Trust Trial Balance as at 30 May, 2017
 Using the Trust Cash Book and ledger records of Evansdale Realty that you have
completed, prepare a Trust Bank Reconciliation so it complies with the Regulations.
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You are entitled to assume that the bank statement is correct.
Scenario
 Students to note the following:
 The Trust Cash Book, Trust Ledger, Trust Trial Balance and Bank Reconciliation are
to be completed so as to comply with the appropriate legislation in your State.
 The next Trust Receipt Number to be issued is number 101 and the next Trust
Cheque number is 710.
 All trust receipts are banked on the day of receipt.
 All receipts and payments are by cheque unless otherwise stated.
 All transactions are GST free unless stated.
 The first client ledger folio number is 110
 Calculate commission on rent received only
May 2017
2nd Obtained a new tenant C Moses for M Babbage who paid 2 weeks rent in advance
and 4 weeks bond by cheque made payable to agent. Details were:
Bond $1760
Rent $880
Received rent from J English on behalf of H Spicer $450 and $150 for water usage.
3rd Received rent from the tenant C Risbey for the owner M Babbage $900
6th Received $1000 rent from O Cromwell for Y Burgess
7th Paid Darkside Plumbing on behalf of M Babbage $160
Paid outstanding amount due to the Rental Bond Board.
9th Received $450 rent from J English by direct deposit/EFT for H Spicer.
10th Obtained a new tenant L Willis for M Babbage who paid a bond (cheque payable to
the agent) as well as 2 weeks rent in advance. Details were:
Bond $2,400
Rent $1,200
16th Obtained new tenant K Cross for a new landlord J Bowers. Tenant paid $800
representing 2 weeks rent in advance and $1600 was paid directly to Rental Bonds
Online.
17th Paid outstanding amount due to Rental Bond Board.
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18th Paid Metropolitan Water $210 on behalf of H Spicer.
20th Paid Spotless $250 for cleaning of unit belonging to M Babbage
21st Settled with Y Burgess. Property management fees of 7.7% GST inclusive and the
balance was paid to landlord.
22nd Paid Evansdale Newspapers the sum of $940.
23rd Received $2000 rent from O Cromwell for Y Burgess
24th Received $400 rent from K Cross for J Bowers.
26th The cheque from K Cross was dishonoured. The tenant agreed to pay cash which
was banked today.
30th Received rent from Z Varga $1000 by EFT for Y Burgess
30th Settled the outstanding balance to date with the owners M Babbage, J Bowers and
H Spicer. The property management fees are 7.7% including GST calculated on
rent received only (do not included money received for other purposes).
The blank forms required for this exercise can be found on a separate document
called ‘CPPDSM4006A_Assmt1_Answer_sheet.xls’. Click on tabs at the bottom of the
window (i.e. - receipt side of journal, payment side of journal, ledgers & trial balance
& bank reconciliation) to access the relevant worksheet for each task (see diagram
below).
Bank statement
Countrywide Bank
Evansdale Realty Property Management Trust Account
Date Details Debit Credit Balance
Balance b/f Nil
02/05/2017 Deposit 3240.00 3240.00 c
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r
03/05/2017 Deposit 900.00 4140.00
c
r
06/05/2017 Deposit 1000.00 5140.00
c
r
07/05/2017 711 1760.00 3380.00
c
r
09/05/2017 Deposit 450.00 3830.00
c
r
10/05/2017 Deposit 3600.00 7430.00
c
r
16/05/2017 Deposit 800.00 8230.00
c
r
18/05/2017 712 2400.00 5830.00
c
r
18/05/2017 713 210.00 5620.00
c
r
21/05/2017 715 77.00 5543.00
c
r
21/05/2017 716 923.00 4620.00
c
r
23/05/2017 Deposit 2000.00 6620.00
c
r
24/05/2017 Deposit 400.00 7020.00
c
r
26/05/2017 Dishonour 400.00 6620.00
c
r
27/05/2017 Deposit 400.00 7020.00
c
r
30/05/2017 717 229.46 6790.54
c
r
30/05/2017 718 2340.54 4450.00
c
r
30/05/2017 719 69.30 4380.70
c
r
30/05/2017 720 770.70 3610.00
c
r
30/05/2017 721 92.40 3517.60
c
r
30/05/2017 722 1107.60 2410.00
c
r
Checklist
Before uploading project to the OLS, please ensure that you completed the following:
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Part A - Knowledge Questions
Part B - Practical activity:
 Receipt side
 Payments side
 Ledgers and trial balance
 Bank reconciliation
If you are unable to complete this task for a specific reason, please contact your teacher to
discuss alternative arrangements for demonstrating your skills and knowledge.
LA022190 Assessment 1, UnitCPPDSM4006A,Ed3 7
© New South Wales Technical and Further Education Commission, 2017(TAFE NSW – OTEN), Archive version1,April 2017