Trust Accounting Requirements Flashcards

A travel agency owner uses client trust funds to pay for an urgent supplier invoice after the operating account ran dry, intending to replenish the trust account the following week. Under TICO's framework, this is:

Answer: A serious violation — there is no permissible basis for using trust funds for operating expenses, regardless of intent to repay

Using client trust funds for operating expenses is a fundamental violation. Intent to repay and short-term duration do not make the withdrawal permissible.

When is it permissible to withdraw earned commission from the trust account?

Answer: Once the supplier has confirmed the booking and the funds have been forwarded to the supplier, leaving only the earned commission in the trust account

Commission can be withdrawn from the trust account after the booking is confirmed with the supplier and the supplier payment has been forwarded, leaving only the commission portion in trust.

Under TICO's trust accounting requirements, which of the following records must be maintained as part of the trust account documentation?

Answer: Monthly bank statements, monthly reconciliations, and a record of each client transaction showing deposits and withdrawals

Registrants must maintain comprehensive trust account records including monthly bank statements, reconciliations, and transaction-level records for each client booking.

A travel agency issues a client a receipt and deposits the client's payment into the trust account. Before the booking is confirmed, the client decides to cancel. Under trust accounting rules, the client is entitled to:

Answer: A refund from the trust account, less any legitimately applicable cancellation fees that were disclosed to the client before payment

Clients who cancel before the booking is confirmed are entitled to a refund of their trust account funds, less any disclosed cancellation fees.

A TICO inspector arrives to audit a travel agency's trust account and discovers that the broker of record has been making monthly withdrawals from the trust account labeled as 'operating expense reimbursements.' Under TICO's trust accounting rules, this practice is:

Answer: A fundamental violation — trust account withdrawals for operating expenses are not permitted regardless of how they are labeled

Withdrawing trust funds for any operating expenses is prohibited, regardless of labeling, ownership status, or amount. The trust account cannot be used for non-client-related disbursements.

An agent's designated trust account earns interest. Under Ontario Regulation 26/05, how must this interest be treated?

Answer: The Regulation specifies how trust account interest must be handled; agents must follow the current rules to determine whether interest belongs to the agency or must be credited to clients

Ontario Regulation 26/05 addresses how trust account interest must be treated. Agents must comply with the current rules, which specify the permissible uses of trust account interest.