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Brokerage Standards Manual

XI. Appendix

Trading Services Example

ABC Realty Ltd. is a newly licensed real estate company under RESA.

This case will show how ABC Realty Ltd. records all its trust transactions and maintains its trust accounting books and records in accordance with general trust accounting principles and RESA. Please note that this case is for a manual accounting system. Brokerages with computerized accounting systems will have most of the following exhibits automated.

EXHIBIT I

TRUST FUNDS RECEIVED AND DISBURSED

RECEIVED

Deal #

Seller/
Buyer

Date Funds Received

Date Funds Deposited to Bank

Pre-numbered Receipt #

Amount

1

A/B

January 17, 2008

January 18, 2008

1

$ 1,500.00

2

C/D

January 19, 2008

January 20, 2008

2

$ 1,000.00

3

E/F

January 24, 2008

January 24, 2008

3

$ 5,000.00

4

G/H

January 28, 2008

January 31, 2008

4

$ 10,000.00

5

I/J

January 30, 2008

January 31, 2008

5

$ 5,000.00

6

K/L

January 31, 2008

February 1, 2008

6

$ 20,000.00

1

A/B

January 17, 2008

January 18, 2008

7

$500.00

In accordance with section 27 of RESA, ABC Realty Ltd. has ensured that all trust funds received were deposited promptly into a pooled trust account. Please note the date trust funds were received and the date trust funds were deposited to the bank. A brokerage is required to deposit trust funds “promptly” upon receipt.

To assist their accountant in preparing the annual Accountant’s Report, ABC Realty Ltd. has recorded references such as the deal number and/or the seller/buyer on the bank deposit slip.

If the parties have agreed, in the Contract of Purchase and Sale, that the deposit is to be placed into an interest bearing term deposit on a specific date, the funds must initially be deposited into the pooled trust account and then placed in an interest bearing term deposit. Upon redemption of the term deposit, funds must be redeposited to the pooled trust account before being disbursed.

As there are no provisions in RESA which permit a brokerage to maintain non-trust funds in a trust account, ABC Realty Ltd. has ensured that it did not deposit non-trust funds or maintain a cash float in the brokerage trust account.

DISBURSED

Deal # Reference

Date Funds Disbursed

Cheque #

Date Cleared Bank

Amount

1

January 26, 2008

1

January 28, 2008

$ 2,000.00

2

January 28, 2008

2

February 2, 2008

$ 1,000.00

3

January 31, 2008

3

February 3, 2008

$ 5,000.00

In accordance with the “stakeholder” obligations of RESA, ABC Realty Ltd. has ensured that all trust disbursements were only made once the brokerage has been authorized to disburse the trust monies (i.e. lawyer/notary title registration confirmation, trust release signed by parties of original collapsed contract).

EXHIBIT II

TRUST JOURNAL

The trust journal records all receipts and all disbursements with reference to the deal number, a description of the party involved or the transaction, the receipt or cheque number, the amount of the receipt or disbursement and a running balance of the pooled trust account.

Description

Deal No.

Date

Amount Received

Receipt (Pre-numbered)

Amount Disb.

Chk.No.

Trust Balance

Balance Forward            

NIL

Received from Buyer B

# 1

January 17, 2008

$ 2,000.00

# 1

-

-

$ 2,000.00

Received from Buyer D

# 2

January 19, 2008

$ 1,000.00

# 2

-

-

$ 3,000.00

Received from Buyer F

# 3

January 24, 2008

$ 5,000.00

# 3

-

-

$ 8,000.00

Disbursed to General Account

# 1

January 26, 2008

-

-

$ 1,500.00

# 1

$ 6,500.00

Disbursed to Commission Trust Account

# 1

January 26, 2008

-

-

$ 500.00

# 4

$ 6,000.00

Disbursed to General Account

# 2

January 28, 2008

-

-

$ 1,000.00

# 2

$ 5,000.00

Received from Buyer H

# 4

January 28, 2008

$ 10,000.00

# 4

-

-

$ 15,000.00

Received from Buyer J

# 5

January 30, 2008

$ 5,000.00

# 5

-

-

$ 20,000.00

Disbursed to General Account

# 3

January 31, 2008

-

-

$ 5,000.00

# 3

$ 15,000.00

Received from Buyer L

# 6

January 31, 2008

$ 20,000.00

# 6

-

-

$ 35,000.00

Commission Trust Account Journal

Description

Deal No.

Date

Amount Received

Receipt (Pre-numbered)

Amount Disb.

Cheque No.

Trust Balance

Balance Forward            

NIL

Received from Trust-Rep A Smith

# 1

January 26, 2008

$ 500.00

#007

-

-

$500.00

ABC Realty Ltd. has ensured that the trust funds received and disbursed (see Exhibit I) were recorded in the trust journal records on a daily basis.

ABC Realty Ltd. has also ensured that the general accounts are updated on a weekly basis.

To assist their accountant in preparing the annual Accountant’s Report, ABC Realty Ltd. has recorded references, such as the deal number and/or the seller/buyer on the receipt, cheque, or electronic banking documentation.

EXHIBIT III

INDIVIDUAL TRUST LEDGERS

The individual trust ledgers include a separate ledger for each individual deal. Each ledger has a deal reference number and then lists the various transactions that occur with that particular deal. The record for each deal contains all of the receipts and disbursements which take place with this deal.

ABC Realty Ltd. has ensured that the trust funds received and disbursed (see Exhibit I) were recorded in the Individual Trust Ledgers on a daily basis as was done in the trust journal (see Exhibit II).

Deal # -Seller/Buyer

Description

Date

Receipt

Trust Receipt

Chk

Trust Disb.

Balance

1-A to B Receipt from Buyer B January 17, 2008 1 $ 1,500.00 - - $ 1,500.00
  Receipt from Co-Operating Brokerage January 25, 2008 7 $ 500.00     $ 2,000.00
  Payment to general-brokerage commission January 26, 2008     #1 $ 1,500.00 $ 500.00
  Payment to commission trust account-Rep A. Smith January 26, 2008     #4 $ 500.00 -
Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
2-C to D Receipt from Buyer D 
Transfer to General
January 19, 2008 
January 31, 2008

$ 1,000.00


# 2

$ 1,000.00

$1,000.00

 

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
3-E to F Receipt from Buyer F 
Transfer to general
January 24, 2008 
January 28, 2008

$ 5,000.00 


# 3

$ 5,000.00

$ 5,000.00

 

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
4-G to H Receipt from Buyer H January 28, 2008 4

$ 10,000.00

- -

$ 10,000.00

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
5-I to J Receipt from Buyer J January 30, 2008 5

$ 5,000.00

- -

$ 5,000.00

Deal # -Seller/Buyer Description Date Receipt Trust Receipt Chk Trust Disb. Balance
6-K to L Receipt from Buyer L January 31, 2008 6

$ 20,000.00

- -

$ 20,000.00

At the end of each month, ABC Realty Ltd has ensured that a Trust Liability Reconciliation is made of the remaining balance (if any) on each individual trust ledger (see Exhibit VI).

In order to ensure that all the transactions have been recorded correctly, ABC Realty Ltd. has confirmed that the total of these individual trust ledgers agree to the total in the trust journal.

EXHIBIT IV

TRUST BANK STATEMENT

The following is a sample of a trust bank statement that would be received by the brokerage from the bank each month for each pooled trust account held for the brokerage. Please note that section 30 of RESA prohibits the withdrawal of service charges from a pooled trust account and section 29 requires that interest on a pooled trust account is forwarded to the Real Estate Foundation of BC.

Bank of British Columbia 
Account # 123456 
Bank Statement as at January 31, 2008

ABC Realty Ltd.
Trust Account

Transaction Details

Date

Description

Amounts debited from your account ($)

Amounts credited to your account ($)

Balance ($)

Business Current Account #123456

Account type: POOLED TRUST

 

Business name:

ABC Realty Ltd.

January 1, 2008

Opening balance

   

0.00

Jan 18

Deposit

$ 2,000.00

-

$ 2,000.00

Jan 20

Deposit

$ 1,000.00

-

$ 3,000.00

Jan 24

Deposit

$ 5,000.00

 

$ 8,000.00

Jan 26

Cheque, NO. 001

 

$ 1,500.00

$ 6,500.00

Jan 26

Cheque, NO. 002

 

$ 500.00

$ 6,000.00

Jan 31

Deposit

$ 10,000.00

 

$ 16,000.00

Jan 31

Deposit

$ 5,000.00

 

$ 21,000.00

Jan 31

Closing totals

$ 23,000.00

$ 2,000.00

$ 21,000.00

Bank of British Columbia 
Account # 123457 
Bank Statement as at January 31, 2008

ABC Realty Ltd.
Commission Trust Account

Transaction Details

Date

Description

Amounts debited from your account ($)

Amounts credited to your account ($)

Balance ($)

Business Current Account #123457

Account type: POOLED COMMISSION TRUST

Business name:

ABC Realty Ltd.

         

January 1, 2008

Opening balance

   

0.00

Jan 26

Receipt 007

$ 500.00

 

$ 500.00

         

Jan 31

Closing totals

$ 500.00

nil

$ 500.00

ABC Realty Ltd. has reviewed the trust bank statement to ensure that:

  • the information displayed is accurate (agrees to all bank deposit slips and cancelled cheques);
  • no service charges have been withdrawn from the trust account; and
  • the bank has forwarded the interest earned on the trust account to the Real Estate Foundation of BC.

EXHIBIT V

TRUST BANK RECONCILIATION AS AT JANUARY 31, 2008

ABC Realty Ltd. has ensured that the monthly trust bank reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately upon receipt of the trust bank statement(s).

Balance Per Bank Statement as at January 31, 2008
(This balance is taken from the bank statement on the previous page.)

$ 21,000.00

Add: Outstanding Deposits 
(Note: Deposits made before the end of the month per the trust journal but which are not shown on the bank statement should be entered here.)

 

Receipt #

Date

Amount

 

6

January 31, 2008

* $ 20,000.00

20,000.00

Subtotal

41,000.00

Less: Outstanding Cheques 
(Note: Cheques written before the end of the month per the trust journal which have not yet cleared the account should be entered here.)

 

Cheque #

Date

Amount

 

3

January 31, 2008

$ 5,000.00

 

2

January 28, 2008

1,000.00

6,000.00

Adjusted Bank Balance as at January 31, 2008 
(This amount should agree with the balance on the trust journal [Exhibit II] and the trust liability reconciliation [Exhibit VI] at the end of the month

$ 35,000.00

*Note: This deposit was placed in a separate interest bearing trust account in the name of the client.

Commission Trust Account

Balance Per Bank Statement as at January 31, 2008
(This balance is taken from the bank statement on the previous page.)

$ 500.00

Add: Outstanding Deposits 
(Note: Deposits made before the end of the month per the trust journal but which are not shown on the bank statement should be entered here.)

 

Receipt #

Date

Amount

 
     

0

Subtotal

0

Less: Outstanding Cheques
(Note: Cheques written before the end of the month per the trust journal which have not yet cleared the account should be entered here.)

 

Cheque #

Date

Amount

 
       

Subtotal

0

Adjusted Bank Balance as at January 31, 2008 
(This amount should agree with the balance on the trust journal [Exhibit II] and the trust liability reconciliation [Exhibit VI] at the end of the month

$ 500.00

 

EXHIBIT VI

TRUST LIABILITY RECONCILIATION AS AT JANUARY 31, 2008

The trust liability reconciliation is a summary of each individual outstanding client ledger.

ABC Realty Ltd. has ensured that the monthly trust liability reconciliation(s) were prepared no later than five weeks after the monthly accounting cut-off date for the accounts or immediately on receipt of the trust bank statement(s). Section 7-4(2) of the Rules requires that the for each trust account of a brokerage, the monthly reconciliations and the monthly trust asset and liability reconciliations must be reviewed, dated, and initialed by a related managing broker or by a person designated by a related managing broker.

ABC Realty Ltd. has also ensured that the total trust funds in the trust liability reconciliation(s) agree to the adjusted bank balance (see Exhibit V).

Deal #

Trust Funds

Commission Trust Funds

Comment

1

 

$ 500.00

Rep-A. Smith

4

$ 10,000.00

 

In pooled trust

5

$ 5,000.00

 

In pooled trust

6

$20,000.00

 

Term deposit certificate # 7

Total Trust Funds

$ 35,000.00

$ 500.00

 
   

$ 35,500.00