accounting
A reference manual
December 2005
December 2005
This publication was produced by the Real Estate and Business Agents Supervisory
Board (the Board). REBA is the statutory authority responsible for regulating the
real estate industry in Western Australia.
This publication is to be read in conjunction with the relevant legislation.
If agents require the services of an interpreter contact the Translating and Interpreting
Services (TIS) on 131 450 and ask for a connection to 1300 30 40 64.
This publication is intended to provide general advice only. It is not intended to
provide legal advice or advice about individual cases. Readers should seek
appropriate independent advice about their particular circumstances.
This publication contains general information that was current at the time of print.
Additional copies of this publication are available free of charge on the Boards
website or by calling the Real Estate and Settlement Call Centre. (See contact
details on the back cover.)
Contents
Introduction
Additional copies
1:5
3
3
4
4
1:6
5
5
5
6
10
11
11
12
13
13
13
14
2:3
Trust receipts
Trust receipt process
Content of trust receipts
Receipts for rent and tenancy bonds
15
15
16
18
19
21
23
23
28
28
28
29
29
30
ii
30
31
32
34
34
35
Areas to watch
35
35
36
36
36
37
37
37
38
38
Glossary
Index
39
41
Introduction
The Real Estate and Business Agents Act 1978 ("the Act") requires the strict
maintenance of a formal set of trust account records which show at any time the
state of a real estate and business agents trust account.
This booklet is designed to assist agents to establish and maintain a trust
account recording system that complies with the Act. The booklet is not a
comprehensive accounting text for agents and familiarity with the content of this
booklet is not sufficient to satisfy the requirement that agents have a sound
working knowledge of the Act.
Additional copies
Additional copies of this booklet are available free of charge on the REBA
website www.reba.wa.gov.au or from REBA:
REBA
Locked Bag 14
Cloisters Square
Perth WA 6850
Telephone: 9282 0843
Fax: 9282 0869
All trust money must be held in a trust account in the agents name in a
prescribed financial institution. Prescribed financial institutions include all banks,
permanent building societies and credit unions.
Refer:
1:3 Why are there special requirements within the Act for
the control of trust money?
Agents hold large amounts of money on behalf of clients. The trust money
accounting system aims to ensure that all trust money held by agents can be
accurately accounted for at all times. Trust account and auditing requirements
increase public confidence in the services of agents.
Agents holding tenancy bond accounts must ensure that the money is kept
separate in a Tenancy Bond Trust Account. Therefore, agents who handle sales,
as well as maintain a rent roll and hold tenancy bonds are required to have a
minimum of two trust accounts (ie General Trust Account and REBA Bond Trust
Account).
Agents may choose to open separate trust accounts for such areas as sales,
property management, variable outgoings and strata management. However, the
use of multiple trust accounts will increase bank fees and may lead to a greater
potential for errors to be made.
ABC Pty Ltd (ABN 12 345 678 912) T/A XYZ Real Estate
REBA TRUST A/C TC 12345
When there is more than one trust account (eg sales, rental), the account
identifier should appear after the words REBA TRUST A/C.
Examples:
ABC Pty Ltd (ABN 12 345 678 912) T/A XYZ Real Estate
REBA TRUST A/C Sales TC 12345
ABC Pty Ltd (ABN 12 345 678 912) T/A XYZ Real Estate
REBA TRUST A/C Rental TC 12345
ABC Pty Ltd (ABN 12 345 678 912) T/A XYZ Real Estate
ABC Pty Ltd (ABN 12 345 678 912) T/A XYZ Real Estate
REBA TENANCY BOND TRUST A/C TC 12345
Private landlords are also required to open a Tenancy Bond Account in the
names of the owner(s) and the tenant(s) titled TENANCY BOND A/C which
should appear after the name(s) of the tenant(s).
Example:
The notification should provide the name and number of the trust account and
the name and address of the prescribed financial institution with which the trust
account is maintained. The date on which the change was made should also be
included.
The notification requirement applies to general trust accounts, as well as
any tenancy bond trust accounts established. The Board does not need to
be advised about the opening, closing or amending of interest bearing trust
accounts.
Refer:
1:9
What trust documents and records must be
maintained?
It is essential that hard copies of the following records can be produced at the
request of the agents auditor or a REBA inspector.
Trust documents and records that must be maintained include:
a record of money received for or on behalf of any other person;
trust receipt books register;
duplicates of every completed trust account deposit form;
trust account journals;
trust ledgers;
trust cheque books register;
records of trust money payments;
statement of trust money;
register of securities;
trust account reconciliation statements; and
any other books, accounts or records kept by an agent relating to trust
money.
It is also recommended that back-up copies of computer records are retained
off-site. This measure will ensure access is available to the records in the
event of error, falsification of records by an employee or physical damage to
the system. A useful system is to maintain off-site a set of discs with one disc
labelled for each working day (eg Monday, Tuesday etc). The disc labelled for
that particular day is taken to work to back up records at the end of the day.
Real Estate Trust Accounting - A Reference Manual
The set of discs are then rotated the following week. With this system in place,
all the discs except the one labelled for that day are kept off-site.
Refer:
the agent is licensed and held a current Triennial Certificate when the
services were provided [section 60(1)(a)];
the agent has a valid appointment to act in writing signed by the person for
whom the services are being provided [section 60(1)(b)];
the appointment to act complies with the requirements of section 60(2) and
regulation 6BA; and
the client is provided with a true copy of the appointment to act
immediately after they sign [section 60(2)(c)].
If one or more of the above requirements are not met, then an agent can only
obtain the commission if they have the vendors authority to do so. If the agent
does not have the vendors authority, then the dispute is a civil matter between
the parties.
When an agent is requested to transfer the purchasers deposit to the settlement
agent or solicitor, the agent generally retains a portion of the deposit to cover
the commission payable and other approved costs. The agent may only retain
the money if the appointment signed by the vendor allows the agent to deduct
commission and approved expenses from the deposit. The portion of the deposit
that comprises the agents fee should not be paid out from the trust account until
settlement has taken place.
Refer:
10
2:1
11
13
Example One demonstrates a general purpose trust receipt format that meets
the requirements under the Regulations.
Example One: General Purpose Trust Account Receipt
ELLIOT ENTERPRISES PTY LTD ABN 12 345 678 912 T/A SUNRISE REAL
ESTATE
Licensed Real Estate and Business Agent
Trust Account Receipt
16 Horizon Street, Perth 6000
No: 00001
....../...../.....
Received from .................................................................................................
Address ...........................................................................................................
the sum of .......................................................................................................
for ....................................................................................................................
.........................................................................................................................
.........................................................................................................................
.........................................................................................................................
for and on behalf of Elliot Enterprises Pty Ltd ABN 12 345 678 912
Signed .............................................................................................................
Cheque
$.................................
(name of signatory).....................................
Cash
Total
$............
$............
All receipts should be posted to the cash receipts journal by the next working
day and the receipt details need to be recorded.
15
where the money is paid by cheque, the name of the drawer and the name
and branch of the financial institution against which the cheque was drawn.
Most standard bank deposit books issued by trading banks will include this
information.
Since all money paid into the trust bank account must be matched by a trust
account receipt, it is useful for agencies with more than one branch to note on
the copy of the bank deposit form the serial numbers of the receipts which were
issued in respect of the money banked. This practice assists in bookkeeping,
and will aid the auditor when checking details of receipts issued against money
banked. For example:
$6,471.00
$267.48
Total deposit
$6,738.48
Date:
DD/MM/200X
Payment to:
Amount:
$10,000.00
767110
17
18
19
Sample Ledger
Client Name
Account No:
Address:
Description of Transaction:
.............................................................................................................................
.............................................................................................................................
.............................................................................................................................
Date Particulars Jnl Ref
20
Agents sometimes maintain a surplus amount within the trust account to absorb
any inadvertent deficiencies that may arise from dishonoured bank cheques or
bank charges. In no circumstances should extra funds be kept in the trust
account.
A buffer fund cannot be used to offset bank fees or for any other reason. Agents
should clear their commission or fees account to their general account at least
weekly. The Board strongly recommends against the practice of retaining
commissions and management fees in the trust account for an extended period
of time.
The removal of these excess funds from the trust account is for the benefit of
all parties. If an agent maintains a buffer in a trust account, then they will not be
aware when the trust account is overdrawn. This means they are less likely to
be able to identify poor trust account management or fraud by employees.
The person in bona fide control is responsible for checking each ledger account
each month to detect if specific ledgers are overdrawn, and to correct any
errors.
Refer:
21
The trust account transfer journal must include the following information:
the date of transfer;
the name of the trust ledger account from which the money is transferred;
the name of the trust ledger account to which the money is transferred;
a notation or code indicating the purpose for which the money is
transferred; and
the amount of money transferred.
A separate transfer journal must be maintained for each trust account.
Transfer journal entries equate to both a payment and a receipt of trust money
and therefore, must be fully recorded. Explanatory notes for each journal entry
should be included. Receipt and payment transactions need to be supported by
signed trust documents (receipt forms and cheque butts). The agent should also
sign transfer journal entries as evidence of the agents authorisation of the entry.
To reduce the incidence of error or theft, the person in bona fide control must
sign off all entries in the trust account transfer journal.
A suggested layout for the journal is:
DR
Date
Particulars
4/8/01
S. James
J1
10,000.00
4/8/01
R. Williams
W3
CR
Transfer To
$
c
10,000.00
Person in
bona fide
controls
signature.
Bob Smith
This journal is used also when errors require correction such as when the
incorrect name of a client has been used and the transaction needs to be
cancelled.
22
23
receipts and cash payments. While the bank also records this information,
it records it from a different perspective to that of an agent. For example,
cash receipts that are debits in the agents 'cash at bank account' entries in
the journal are shown as credits on the bank statement itself. Similarly, cash
payments that appear as credits in the 'cash at bank account' entries in the
agents journal will be shown as debits on the bank statement.
Often, there will be discrepancies between the trust records and the bank
statement. Once an agent becomes familiar with these discrepancies, they will
find the process of trust account reconciliation becomes easier to administer.
The procedure for preparing a bank account reconciliation is as follows:
Add the cash column (total) of the cash receipt journal for the particular
month (eg March).
Add the cash column (total) of the cash payments journal for the particular
month (eg March).
Read the bank statement for the particular month (eg March) and check
that the money deposited each day went into the bank account. These
amounts will be entered as credits on the bank statement.
Check that all the cheques drawn appear in the bank statement. These
amounts will be shown as debit entries. Check also that all cheques that
appear in the bank statement were in fact authorised and issued.
Using a pencil, tick off each entry on the bank statement against the
corresponding entry in the cash journals. Items that may appear in the
bank statement but not the cash journal could be a direct deposit. Deal
with a direct deposit by writing a receipt, dating it and completing the
details of the receipt, making sure the date on which the deposit was
actually credited to the account. Enter this information into the cash
receipts journal and credit the appropriate client ledger account. Direct
deposits effected by electronic transfer will not require issue of a receipt.
Check that all electronic transfers have been correctly recorded and
accounted for.
Deposits that are not ticked in the cash receipts journal represent
outstanding deposits and will be used later in the bank reconciliation
statement.
Cheques appearing in the cash payment journal that have not been ticked
are referred to as unpresented cheques and will be used in the preparation
of a bank account reconciliation statement.
24
The balance of the bank statement and trust cash at bank ledger (or balance
as per trust cash journal) should be the same after making adjustments for
outstanding deposits and unpresented cheques. If they do not, an error has
been made and will need to be identified.
The following controls need to be conducted:
check additions;
check entries from receipts to the cash receipts journal;
check entries from cheque butts into the cash payments journal;
make sure all unpresented cheques have been added together correctly;
make sure all outstanding deposits, including electronic transfers, have
been accounted for; and
check the bank statement for any bank charges that may have been
debited to the trust bank account.
An agent should request that the bank does not debit the trust account with
bank charges because this will create a deficiency. However, banks may
inadvertently debit trust bank accounts with certain charges. The agent should
deal with these charges immediately.
25
26
67,500.00
52,000.00
48,000.00
119,500.00
71,500.00
78,000.00
357
2,500.00
358
4,000.00
6,500.00
71,500.00
Nil
78,000.00
71,500.00
31 August 2001
Signed:
Bob Smith
27
28
company auditors are available, the Board may approve another person with
appropriate qualifications as an auditor.
Refer:
29
30
31
or solicitors trust account upon written agreement by the parties who own the
funds.
If unclaimed money remains in the trust account they may be disbursed in
accordance with the provisions of the Unclaimed Monies Act 1990 (see below).
All accounting records must be kept for not less than six years from the date on
which the money was received.
Refer:
33
34
agency, which may have been falsified by the perpetrator. For these reasons,
it is recommended that agents discuss internal control mechanisms with their
statutory appointed auditor. The person in bona fide control can address a
number of potential problems by:
making periodic checks of the work of employees;
involving themselves in bank reconciliations;
maintaining control over cheque books and receipt books; and
understanding and operating the computer system.
An independently managed whistle-blowing facility (telephone, fax or e-mail)
can also be an effective and relatively cheap way in which to encourage honest
employees to report suspicions of theft or fraud to their superiors.
35
The order that transactions are printed within the ledger. It is possible for a
debit balance to appear in the ledger that is not a true debit balance. This
occurs where a payment and receipt relating to a particular trust ledger
account occur on the same day, and the computer prints the payment
before the receipt. There are several major systems available that will not
allow a payment to be processed if the client ledger reflects an overdrawn
situation.
The person in bona fide control should be conversant with all computer systems
used to maintain records and accounting systems for trust funds and not rely on
one or two staff members. Also the person in bona fide control is responsible
for maintaining backup copies of computer records and for their secure storage
off-site as these records are invaluable, particularly if there is a theft or fire at
the agencys premises.
36
37
If the agency operates more than one trust account and therefore more than one
cheque book, each cheque book should be readily identifiable to the account to
which it relates. The person in bona fide control is to attain copies of presented
cheques on a periodic basis to ensure that no cheques have been forged.
38
GLOSSARY
a) he/she is appointed by a court as
a receiver or receiver and manager
of the business of another; or
Account
Means the Board Interest Account
established under section 125(1) of
the Act.
Act (the)
The Real Estate and Business Agents
Act 1978.
Agent
A person who is a real estate agent or
a business agent, or both a real estate
agent and a business agent.
Approved
Means approved by REBA.
Auditor
A person appointed under the Act to
audit the trust accounts of an agent.
Authorised financial institution
Means a bank, a society, or any other
body that is prescribed or that belongs
to a class of bodies that is prescribed
by the Act.
Bank
A bank as defined in section five
of the Banking Act 1959 of the
Commonwealth, or a bank constituted
by or under law of the State.
Bank account
An account kept with a bank, society
or other similar body.
Board (the)
The Real Estate and Business Agents
Supervisory Board.
Business agent
A person whose business either alone
or as part of or in connection with any
other business, is to act as an agent
for consideration in money or moneys
worth, as commission, reward, or
remuneration, in respect of a business
transaction as defined by this section,
but does include a person whose
business is to act by reason that;
39
GLOSSARY continued
Person in bona fide control
Sometimes described as agent in bona
fide control. A licensed person in a real
estate business who is responsible for the
administration of real estate transactions
and the supervision of persons involved
in those transactions.
Principal
The term principal in the real estate
industry refers to the client of the agent.
The term does not refer to business
owners of directors as is the case for
most other industries.
REBA
The Real Estate and Business Agents
Supervisory Board.
Real estate agent
A person whose business, either alone
or as part of an in connection with any
other business, is to act as an agent for
consideration in money or moneys worth,
as commission, reward or remuneration,
in respect or a real estate transaction as
defined by the Act, but does not include
a person whose business is to so act by
reason that
a) he is appointed by a court as a
receiver or receiver and manager of the
business or another person; or
b) he is an official receiver or trustee
within the meaning of the Bankruptcy Act
1966 of the Commonwealth or any Act in
amendment or substitution of that Act.
Real estate transaction
Means:
40
INDEX
Auditor 4, 5, 7, 8, 10, 11, 16, 18, 23, 28, 29, 30, 31, 32, 34, 35, 38
Balancing 23, 36
Bank charges 4, 21
Bank fees 4, 21
Banking / banked 11, 16, 18, 36, 37
Banks 3, 4, 14, 16, 17, 22, 23, 25, 26, 36, 37
Bond Administrator 3, 6
Building societies 3, 14
Buffer funds 21
Cash payments 18, 23, 24, 25, 37
Cash receipts 14, 18, 23, 24, 25
Change of auditor 30
Cheque payments 37
Commission (Includes fees) 8, 9, 11, 21, 22, 23, 38
Computer systems 10, 13, 15, 35, 36, 37
Conflict of interest 28
Corporations law 28
Credit unions 3
Department of Consumer and Employment Protection (DOCEP) 3, 4, 33
DOCEP (see the Department of Consumer and Employment Protection)
Fees (see Commission)
Fraud 1, 9, 16, 21, 34, 35, 38
General accountant 28
General accounts 21, 38
General trust accounts 3, 4, 5, 7, 14
Interest 3, 4
Interest bearing trust accounts 4, 5, 7, 29
Interim receipts 15
Journal 7, 11, 14, 18, 20, 21, 22, 23, 24, 25, 27, 35, 36
Licensed agent 2, 9, 14
Management letter 30
Misappropriation 34, 38
Person in bona fide control 10, 17, 21, 22, 23, 34, 35, 36, 37
Receipts 4, 6, 7, 12, 13, 14, 15, 16, 17, 18, 20, 22, 23, 24, 25, 27, 29, 35, 36,
37, 38
Receipt books 7, 35, 36
Real Estate Trust Accounting - A Reference Manual
41
INDEX continued
Receipt journal 24
Reconciliations 7, 18, 23, 24, 25, 27, 34, 35, 36
Register of securities 7, 12
Residential Tenancies Act 1987 3, 4, 6, 14, 15, 33
Residential Tenancies Regulations 1989 15, 33
Statutory declaration 28, 29
Strata management 2, 3, 4
TC (see Triennial certificate number)
Tenancy bonds 2, 3, 4, 6, 7, 14, 15, 19, 29
Tenancy bond trust accounts 3, 4, 6, 7, 29
Termination audit 31, 32
Theft 1, 9, 16, 17, 22, 34, 35, 36, 37, 38
Titling of trust accounts 5
Transfer journals 35, 36
Triennial certificate 2, 3, 5, 6, 9, 13, 28, 31
Triennial certificate number 5, 6
Trust deposit forms 15
Trust ledger 7, 15, 17, 18, 19, 21, 22, 27, 35, 36
Trust money 2, 3, 6, 7, 8, 11, 18, 19, 22, 27, 28, 32
Trust receipts 7, 13, 14, 15
Unclaimed trust money 32
Variable outgoings 2
Variable outgoing trust accounts 3, 4
42
Great Southern
South-West
Mid-West
Goldfields/Esperance
North-West
9842 8366
9722 2888
9964 5644
9021 5966
9185 0900
Regional offices: