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Trust Accounting Requirements Flashcards

6 cards from real TICO practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Trust Accounting Requirements flashcards as text

  1. A registrant receives a $12,000 client deposit on March 1 for a trip departing June 15. The supplier invoices $9,000 on April 10, payable by April 30. Under TICO trust accounting rules, what is the EARLIEST the registrant may release the $9,000 from trust to pay the supplier?

    Answer: On April 30, once the payment is actually due to the supplier

    Under Ontario's Travel Industry Act, trust funds may only be disbursed when a payment obligation to a supplier is actually due. The registrant cannot release funds early simply because an invoice exists — the release is tied to the due date, not the invoice date. The funds must remain in trust until April 30.

  2. A travel agency maintains a single pooled trust account for all clients. During an audit, the Registrar discovers the account balance is $4,200 less than the aggregate of all client trust liabilities. Which statement BEST describes the registrant's legal exposure under the Travel Industry Act, 2002?

    Answer: The registrant is in breach regardless of whether any individual client has yet been harmed

    The Travel Industry Act requires that the trust account be sufficient to cover ALL client trust liabilities at ALL times. A shortfall is a breach of the Act the moment it occurs — no individual client needs to have suffered a loss, and there is no statutory 5% tolerance or automatic 30-day cure period before the Registrar may act.

  3. A registrant books a package tour for a corporate client. The client pays $50,000, of which $8,000 represents the registrant's commission. Under TICO trust accounting requirements, how should the $8,000 commission be treated at the time of receipt?

    Answer: It must remain in trust until the supplier has been paid in full

    Under TICO rules, the full amount received from a client — including the registrant's commission — must be held in trust until the registrant's obligation to the supplier is discharged (i.e., the supplier is paid). Only after the supplier payment clears may the commission portion be properly withdrawn from trust as earned revenue.

  4. A registrant operating as a home-based agent under a host agency wants to maintain their OWN separate trust account rather than pooling client funds through the host. Which of the following is CORRECT under TICO regulations?

    Answer: A home-based agent who is themselves a registrant may maintain a separate trust account and bears independent trust obligations

    If a home-based agent is independently registered under the Travel Industry Act (not merely operating under the host's registration), they are a registrant in their own right and may — and indeed must — comply with trust obligations independently, including maintaining their own trust account. The key variable is the agent's own registration status.

  5. A registrant receives a $15,000 client deposit but the bank erroneously credits a $15,000 wire transfer from an unrelated business to the same trust account the following day, bringing the balance to $30,000. The registrant notices the error. What is the registrant's CORRECT course of action regarding the trust account?

    Answer: Immediately notify the bank and arrange return of the $15,000 erroneous credit, keeping only the client's $15,000 in trust

    A trust account must hold ONLY client trust funds. An erroneous deposit of non-trust money — even if it creates an apparent surplus — does not belong in trust. Retaining it would co-mingle non-client funds with trust funds, violating trust accounting rules. The registrant must promptly notify the bank and arrange return of the erroneous funds.

  6. A registrant closes their business and voluntarily surrenders their TICO registration. At the time of surrender, $22,000 remains in the trust account covering bookings for clients whose travel is scheduled 4 months in the future. What MUST happen to these trust funds?

    Answer: The funds must be held in trust and disbursed only as the underlying supplier obligations come due or are refunded to clients

    Voluntary surrender of registration does not extinguish trust obligations. The funds belong to clients and must be applied only to their intended purpose — paying suppliers as obligations come due or returned to clients if travel cannot be fulfilled. The registrant cannot simply absorb the funds, and there is no automatic remittance to TICO's compensation fund upon a voluntary surrender.