TICO Trust Accounting Requirements 2

Question 1

Under Ontario Regulation 26/05, what is the purpose of maintaining a designated trust account separate from operating funds?

Accepted Answer

To ensure that client funds are protected and available to be forwarded to suppliers or refunded to clients if necessary

Answer

To reduce the agency's taxable income by separating client revenue from operating income

Answer

To allow TICO to access client funds directly in the event of a complaint

Answer

To comply with federal anti-money laundering legislation requiring segregated accounts

Question 2

A travel agency maintains a single bank account for all transactions — client payments, operating expenses, and payroll. Under TICO's trust accounting requirements, this practice is:

Accepted Answer

A serious violation — client funds must be held in a dedicated trust account separate from all operating funds

Answer

Acceptable if the agency's accounting software tracks the client funds portion separately

Answer

Permitted for agencies with fewer than five registered agents

Answer

Acceptable if the account is labeled as a 'travel trust account' on bank statements

Question 3

When a travel agent collects a client's payment, what is the correct trust accounting procedure?

Accepted Answer

Deposit the full client payment into the trust account within two business days, then withdraw earned commission only when permissible under the Regulation

Answer

Immediately deposit only the net amount (after deducting commission) into the trust account

Answer

Hold the client funds in a petty cash drawer until the supplier invoice arrives

Answer

Deposit the client funds into the operating account and transfer to trust within 30 days

Question 4

Under TICO's trust accounting framework, which of the following trust account transactions is PERMITTED?

Accepted Answer

Withdrawing funds from the trust account to pay a supplier for travel services that are now due and confirmed

Answer

Withdrawing trust funds to pay the agency's monthly rent

Answer

Transferring trust funds to the owner's personal savings account as a year-end distribution

Answer

Using trust funds to purchase new office equipment for the travel agency

Question 5

An agency's trust account is audited and found to have a shortfall — the balance is less than the total of outstanding client obligations. How serious is this finding?

Accepted Answer

Extremely serious — a trust account shortfall is a fundamental violation that may result in immediate registration suspension and consumer harm

Answer

Minor — agencies are permitted up to a 10% shortfall as a buffer for processing delays

Answer

Serious only if the shortfall exceeds $10,000 in absolute terms

Answer

Not serious if the agency can demonstrate it was due to a bookkeeping error

Question 6

Under Ontario Regulation 26/05, a travel agent is required to prepare a monthly trust account reconciliation. What is the purpose of this reconciliation?

Accepted Answer

To verify that the trust account balance matches the total of all outstanding client obligations, confirming no shortfall exists

Answer

To calculate the agency's monthly commission income for tax reporting purposes

Answer

To prepare the monthly statement of accounts receivable from travel suppliers

Answer

To comply with federal banking regulations for segregated financial accounts