Learning Objectives

• Distinguish trust funds from brokerage operating funds and personal funds.
• Explain the custody chain from receipt through deposit, ledger entry, reconciliation, and authorized disbursement.
• Differentiate commingling, conversion, shortage, overage, stale item, and posting error.
• Prepare and interpret a three-way trust-account reconciliation.
• Apply controls to earnest money, rents, security deposits, owner funds, and settlement-related money.
• Explain how transaction, accounting, communication, and compensation records work together.
• Distinguish negotiable compensation from unlawful payment for licensed activity, undisclosed interests, and improper referral arrangements.
• Separate national principles, Indiana-specific requirements, licensing-exam guidance, and practical brokerage application.

Key Vocabulary

Term	Meaning
Trust Funds	Money or property held by a brokerage for another person and subject to fiduciary, contractual, statutory, or regulatory controls.
Escrow/Trust Account	A separate account used to hold qualifying money belonging to others under governing law and written authority.
Commingling	Improperly mixing client or third-party funds with personal or brokerage operating funds.
Conversion	Unauthorized use or control of another person's money or property.
Beneficiary Ledger	A subsidiary record showing receipts, disbursements, and balance for one transaction, owner, tenant, or other beneficiary.
Journal	A chronological record of account activity.
Three-Way Reconciliation	Comparison of the adjusted bank balance, trust-account book balance, and total of all beneficiary ledgers.
Outstanding Item	A valid deposit or check recorded in the books but not yet reflected by the bank.
Shortage	A condition in which available trust funds are less than the total amount owed to beneficiaries.
Disbursement Authority	Contractual, written, statutory, regulatory, or court authority permitting money to be released.
Audit Trail	Records showing who performed an action, what changed, when it changed, and the source authority.
Referral Fee	Compensation for a referral; permissibility depends on the recipient, licensed activity, governing law, and required disclosures.
Rebate / Incentive	A payment, credit, benefit, or inducement offered in connection with a transaction, subject to current legal and contractual limits.

Chapter Opening

Trust-account mistakes often look small before they become serious: a check sits in a desk, one deposit is posted to the wrong buyer, a bank fee reduces the account, a disputed deposit is released because one party demands it, or a manager assumes the bookkeeping software must be correct. The central rule is simple: money belonging to others must be identifiable, protected, and released only under proper authority.

This chapter connects money, records, and compensation because they all depend on the same discipline. The brokerage must know whose money it is, why it was received, where it is held, what agreement controls it, who authorized movement, and what records prove each step.

Core Lesson

1. Classify the Money Before Touching It

National Concept. The first question is ownership—not the form of payment. A paper check, electronic transfer, rent payment, security deposit, earnest-money instrument, or closing fund may be trust money if the brokerage holds it for another person. Brokerage revenue and operating money are different categories.

Money category	Who beneficially owns it?	Typical treatment
Earnest money	Controlled by the transaction and parties' rights	Deposit and hold under contract and law
Collected rent	Owner, subject to authorized deductions and obligations	Property-management trust controls
Tenant security deposit	Held subject to lease and landlord-tenant law	Separate tracking and lawful disposition
Earned brokerage commission	Brokerage after entitlement and closing conditions	Operating account after authorized transfer
Broker's personal money	Broker	Never used to conceal a trust shortage

Licensing Exam Guidance. Do not decide ownership from whose name appears on the check. Determine why the funds were delivered and what agreement or law controls them.

2. Trust Account Versus Operating Account

A trust account holds money for others. An operating account holds the brokerage's own money. Separation protects beneficiaries, simplifies accounting, reduces creditor and spending risk, and makes an audit possible.

Commingling is improper mixing. Conversion is unauthorized use or control. Conversion is often more severe, but commingling can exist without proof that the money was permanently lost. A trust shortage can result from theft, premature disbursement, a bank charge, duplicate payment, bookkeeping error, or deposit failure. Every shortage requires immediate attention.

3. The Custody Chain

A strong custody chain makes every transfer traceable:

1. Receive: identify date, time, amount, instrument, payer, transaction, and recipient.
2. Acknowledge: provide or preserve the required receipt and terms.
3. Protect: restrict physical and electronic access.
4. Deposit: place funds with the authorized holder within the required time.
5. Post: record the journal and correct beneficiary ledger.
6. Reconcile: compare bank, books, and beneficiary balances.
7. Disburse: release only with verified authority.
8. Retain: preserve the complete record and audit trail.

Practical Brokerage Application. Use dual confirmation when money changes hands: the person receiving funds records them, and a second authorized person confirms the deposit and ledger assignment. Cash and manual checks deserve enhanced control.

4. Indiana Earnest-Money Snapshot

Indiana Law. Current 876 IAC 8-2-2 requires the listing broker, on or before the next two banking days after final acceptance, to deposit transaction money in the listing broker's trust account or with the recipient identified in the purchase agreement. The Commission holds the broker with whom money is deposited responsible for it. Noncash consideration other than cash, check, or equivalent must be communicated to the seller before acceptance and shown in the earnest-money receipt.

The exam principle is broader: promptly follow the governing agreement and state rule; disclose unusual forms of consideration; do not improvise with disputed funds; and identify the broker or escrow holder actually responsible for custody.

5. Noncash and Electronic Funds

Money may arrive as a personal check, cashier's check, wire, electronic transfer, cash, promissory instrument, or other consideration. The brokerage should verify whether the instrument is permitted, whether its form must be disclosed, who bears collection risk, and when it becomes available.

Electronic systems create different risks: redirected wires, altered instructions, duplicate transfers, account takeover, and false payment confirmations. Confirm new or changed instructions through a trusted independent channel. Never rely solely on the contact information contained in an unexpected email requesting a change.

6. Journals, Ledgers, and Source Documents

The bank statement shows movement through the account, but it does not explain beneficiary ownership. The journal shows chronology, while beneficiary ledgers show how much belongs to each transaction or person. Source documents show why the entry was authorized.

Record	Question answered	Example
Bank statement	What cleared the financial institution?	Deposit, check, fee, transfer
Cash receipts/disbursements journal	What did the brokerage record by date?	Receipt 1042, check 388
Beneficiary ledger	Whose money is represented?	Buyer A transaction balance
Source document	Why was the entry permitted?	Agreement, receipt, invoice, release, court order
Audit log	Who created or changed the record?	User, timestamp, prior value

A correcting entry should identify the original error, correction date, authorization, and effect. Never erase, backdate, or overwrite history to make a reconciliation appear clean.

7. Three-Way Reconciliation

A three-way reconciliation compares:

1. The bank statement balance adjusted for valid outstanding deposits, checks, and bank errors.
2. The trust-account cash balance in the brokerage's books.
3. The total of all beneficiary ledgers.

All three should agree. A balanced bank statement alone is not enough. The account could match the books while one beneficiary's money is improperly covering another beneficiary's shortage.

8. Reconciliation Exceptions

Exception	Possible cause	Response
Bank less than books	Unrecorded bank fee or withdrawal	Verify bank source; correct transparently and escalate
Books less than ledgers	Posting error or unauthorized disbursement	Trace each entry and protect funds
Old outstanding check	Payee never received or negotiated it	Investigate; follow lawful stale-item procedure
Negative beneficiary ledger	Overpayment or wrong-ledger posting	Stop further disbursement and identify the source
Unidentified deposit	Missing reference or duplicate receipt	Research without assigning it arbitrarily

Broker Insight. A reconciliation is an investigation, not a math ritual. “Plug” entries that force equality hide the exact exceptions the process exists to reveal.

9. Authorized Disbursement and Disputes

Trust money is not released because one party sounds convincing, a transaction ended, or the brokerage wants the file closed. The holder should identify the controlling agreement, current law, written releases, court orders, and any authorized dispute procedure.

Indiana Law. Current 876 IAC 8-2-2 requires money to remain in the designated account until properly authorized. When a transaction is not consummated, the holder ordinarily does not pay buyer or seller without a mutual release or court order, except under the rule's additional process. After notice that a party intends not to perform, the holder may follow the purchase agreement or, if it is silent, send certified-mail notice identifying the proposed distribution. If no mutual release or litigation occurs within sixty days after mailing, the rule permits release to the identified party. Exact contract interaction and fact-specific use still require managing-broker or legal review.

10. Property-Management Funds

Property management may involve rents, security deposits, owner reserves, utility reimbursements, application fees, vendor payments, and distributions. Each category must be classified and tracked according to the management agreement, lease, landlord-tenant law, trust-account rules, and company policy.

A manager should be able to show beginning balance, each receipt, each authorized charge, each disbursement, and ending balance by property, owner, and tenant as applicable. Vendor invoices should connect to approval and payment records. Owner distributions should not reduce the account below obligations held for others.

11. Transaction and Record Retention

A complete record combines the legal and financial story: representation agreements, offers, contracts, disclosures, amendments, deposit receipts, delivery proof, ledger entries, bank records, reconciliations, releases, invoices, commission authorizations, and material communications.

Electronic storage must preserve integrity, accessibility, security, version history, and authorized access. A screenshot of a platform is not always the full record. The firm should be able to export a readable file with attachments, timestamps, and audit information for the required period.

Indiana Law. IC 25-34.1-4-5 requires detailed trust-account records identifying the funds and accrued interest held for each beneficiary. Current 876 IAC 8-1-13 requires a detailed account summary when requested for an authorized Commission or Attorney General investigation. Exact supporting-record categories, reconciliation frequency, retention periods, electronic-storage standards, and responsibility after transfer or closure remain queued.

12. Compensation Is Negotiable

National Concept. Brokerage compensation is negotiable. Government, competitors, trade associations, and listing services do not set a standard commission. Compensation may be structured as a percentage, flat fee, hourly amount, retainer, success fee, or another lawful arrangement stated in the agreement.

Separate four questions:

1. What did the client agree to pay?
2. What compensation may another source offer?
3. What disclosure or consent is required?
4. Through whom may the payment lawfully flow?

Licensing Exam Guidance. The person who pays compensation does not automatically determine agency. A buyer's broker may receive compensation from more than one source if the relationship, agreement, disclosure, consent, and law permit it.

13. Payment for Licensed Activity

Compensation for licensed brokerage activity generally must flow through the legally responsible brokerage and may not be paid to an unlicensed person for performing acts that require a license. A clerical wage for permitted administrative work differs from a commission for negotiating, showing, procuring, or representing.

Payment	Core issue	Safe analysis
Broker-to-broker referral	Licensure, brokerage channel, agreement	Verify both licenses and written authorization before service
Consumer incentive	Disclosure, lender/closing limits, advertising	Document source, amount, conditions, and approval
Unlicensed lead source	Whether payment rewards licensed activity	Do not disguise a commission as marketing
Team split	Brokerage agreement and payment channel	Process through approved brokerage accounting

Indiana Law. Current 876 IAC 8-2-7 treats payment of a commission or other compensation to an unlicensed person for services requiring a license as incompetent practice. Section 8-1-9 routes an offered cooperative commission to the selling broker rather than directly to a broker associated with that selling broker. Section 8-1-10 requires written client and cooperating-broker fee agreements for referral-service participation. Exact rules for rebates, gifts, incentives, team splits, departing brokers, and out-of-state licensees remain queued.

14. Referral, Rebate, Affiliated-Business, and Antitrust Risk

A referral fee may be lawful in one setting and prohibited in another. Consumer rebates or credits may affect lending, disclosure, settlement, or advertising. Payments tied to settlement-service referrals can create federal RESPA concerns. Ownership interests in title, mortgage, insurance, inspection, or vendor businesses can require disclosure and limits.

Never describe a market commission as “customary,” “required,” or “the rate everyone charges.” Competitors may not coordinate prices, splits, service levels, territories, or customers. The brokerage should make independent business decisions and document the client's negotiated agreement.

15. Fraud Prevention and Internal Controls

Strong internal controls separate custody, recording, authorization, and reconciliation. Small firms may not have four employees, but they can still use bank alerts, view-only review access, dual approval, owner verification, outside reconciliation, restricted vendor changes, and documented monthly review.

Risk	Control
Fictitious vendor	Independent vendor validation and approval
Changed wire instruction	Callback using trusted contact information
Deleted ledger entry	Immutable audit log and restricted permissions
Duplicate disbursement	Invoice matching and payment-system alert
Manager override	Second-person review and exception report

16. Audit and Investigation Readiness

A trust-account audit should not require the office to invent records after the request. Preserve original bank statements, deposit images, canceled checks, journals, beneficiary ledgers, reconciliations, source authority, correction history, and access logs. Respond truthfully through the authorized process.

When an exception is found, secure the funds and records, notify appropriate supervision and counsel, determine who is affected, correct transparently where permitted, satisfy lawful reporting requirements, and strengthen the failed control. Never alter old records to look compliant.

Learn It

Draw the trust-fund chain for one earnest-money deposit: buyer → receiving broker → designated holder → bank → journal → beneficiary ledger → reconciliation → authorized payee. Write the required proof under every arrow. Then identify two places where one person should not control the entire process.

Live It

Pass It

For money questions, use this order: classify ownership, identify the authorized holder, apply the deposit rule, post to the right ledger, reconcile all three records, and disburse only with authority. For compensation questions, identify the service performed, the person's license status, the payment channel, the written agreement, and required disclosure.

Indiana Law Spotlight

Verified Indiana trust-account framework. IC 25-34.1-4-5 requires each broker company to maintain one or more clearly identified interest- or noninterest-bearing trust accounts and deposit all funds belonging to others that come into the company or its associated brokers' possession. Covered funds include earnest money, closing escrows, undisbursed sale proceeds, and other funds belonging to others. Personal or other business funds may not be deposited. Detailed beneficiary records are required, and accrued interest belongs to the beneficiary. Current 876 IAC 8-1-13 requires the account to be at a federally insured financial institution and requires a detailed summary during an authorized investigation.

Verified Indiana earnest-money framework. Current 876 IAC 8-2-2 establishes the next-two-banking-days rule after final acceptance, permits deposit with the listing broker or the purchase agreement's designated recipient, requires disclosure of specified noncash consideration, and keeps funds protected until authorized. Its dispute process recognizes mutual release, court order, the contract's instructions, and—when the contract is silent—a certified-mail proposal followed by a sixty-day period for release or litigation before the holder may distribute as stated in the notice.

Verified compensation framework. Current 876 IAC Article 8 routes cooperative commission through the selling broker, requires written agreements for referral-service participation, prohibits compensation to an unlicensed person for licensed services, and requires full written disclosure to all parties when specified inducements or rebates are offered to obtain a listing or induce a sale.

Indiana legal verification queue: Complete section-level review of account titles, signers, permissible minimum broker funds, interest instructions, receipt documentation, deposits before final acceptance, rejected or withdrawn offers, electronic funds, journals, beneficiary ledgers, reconciliation frequency and method, bank charges, shortages, overages, stale and abandoned funds, property-management money, every disbursement and certified-mail prerequisite, interpleader, record categories and retention, electronic storage, audit access, company transitions, compensation entities and payment channels, team splits, referrals outside the verified service rule, rebates, incentives, gifts, affiliated businesses, federal RESPA, out-of-state payments, departing-broker compensation, disclosure, discipline, remedies, pending rules, and controlling decisions. No unverified accounting procedure, retention period, payment, or fact-specific distribution result is presented as universal.

National Exam Alert

Three records must agree in a trust-account reconciliation: adjusted bank balance, book balance, and total beneficiary ledgers. If only the bank and books agree, a hidden beneficiary shortage may remain. On compensation questions, remember that agency is not determined solely by who pays the broker.

Common Exam Trap

Do not release disputed earnest money merely because a contract terminated or one party demands payment. Termination answers whether performance continues; it does not automatically resolve ownership of the deposit. Look for written authority, mutual release, court order, or the state-authorized process.

PASS FIRST Memory Trick

TRUST: Trace the receipt · Record by beneficiary · Use separate custody · Square all three balances · Transfer only with authority.

Broker Insight

The best trust-account control is not “we trust our bookkeeper.” Trust is a personal quality; internal control is a verifiable system. Good people still mistype amounts, choose the wrong ledger, click fraudulent links, and misunderstand authority. Independent reconciliation protects the client, the bookkeeper, and the brokerage.

Tables & Comparison Charts

Concept	Meaning	Example
Commingling	Improper mixing	Client deposit placed in operating account
Conversion	Unauthorized use or control	Trust money used to pay office rent
Shortage	Funds available are below beneficiary obligations	Ledgers total $20,000; account holds $19,800
Posting error	Entry assigned incorrectly	Buyer A's receipt posted to Buyer B

Compensation question	What to verify
Who performed the service?	License status and scope
Who owes the payment?	Written agreement and entitlement
Where does payment flow?	Responsible brokerage and closing process
What must be disclosed?	Source, amount, conflict, incentive, or affiliation

Chapter Summary

• Classify funds by beneficial ownership before deciding where they belong.
• Trust and operating funds require separation.
• Commingling, conversion, shortage, and posting error are distinct problems.
• A complete custody chain documents receipt through authorized disbursement.
• Three-way reconciliation compares adjusted bank, books, and beneficiary ledgers.
• Disputed funds remain protected until proper authority permits release.
• Compensation is negotiable and does not alone determine agency.
• Payments for licensed activity, referrals, rebates, and incentives require current-law analysis.
• Indiana's trust-account establishment, beneficiary-record, earnest-money timing, designated-holder, noncash-disclosure, disputed-fund, cooperative-compensation, referral-service, and unlicensed-payment rules are verified; remaining accounting, retention, and payment details stay queued.

Quick Review

1. Can you classify earnest money, rent, security deposits, and earned commissions?
2. Can you distinguish commingling from conversion?
3. Can you explain every step in the custody chain?
4. Can you calculate an adjusted bank balance?
5. Can you identify all three parts of a reconciliation?
6. Can you respond to a shortage without altering history?
7. Can you identify valid disbursement authority?
8. Can you analyze compensation by service, license, agreement, channel, and disclosure?

Practice Questions

1. Which question should be answered first when a brokerage receives money?
   1. Who beneficially owns it and why is it being held?
   2. Which salesperson earned the highest split?
   3. Whether the bank offers reward points
   4. Whether the transaction will certainly close
2. Placing a buyer's earnest-money deposit in the brokerage operating account is most directly an example of:
   1. Reconciliation
   2. Commingling
   3. Novation
   4. Subrogation
3. A bookkeeper uses tenant security-deposit money to pay the brokerage's utility bill. This is most directly:
   1. A stale item
   2. A deposit in transit
   3. Conversion
   4. A beneficiary credit
4. Which set contains all three elements of a three-way reconciliation?
   1. Bank statement, tax return, commission agreement
   2. Journal, listing agreement, closing disclosure
   3. Beneficiary ledgers, payroll, vendor invoices
   4. Adjusted bank balance, book balance, total beneficiary ledgers
5. A bank statement shows $14,800. A $1,500 deposit is in transit and $300 of checks are outstanding. What is the adjusted bank balance?
   1. $16,000
   2. $13,000
   3. $14,600
   4. $16,600
6. The adjusted bank balance and book balance are $9,950, but beneficiary ledgers total $10,000. The best response is to:
   1. Reduce one ledger by $50 without explanation
   2. Investigate and protect funds because a $50 shortage exists
   3. Ignore the difference because the bank and books agree
   4. Backdate a $50 receipt
7. Buyer and seller both demand disputed earnest money. The broker holding it should first:
   1. Pay the party who calls first
   2. Split it equally as a compromise
   3. Keep it protected and identify proper disbursement authority
   4. Transfer it to the operating account
8. Which record shows how much trust money belongs to one transaction or beneficiary?
   1. Profit-and-loss statement
   2. General advertising log
   3. Payroll register
   4. Beneficiary ledger
9. Which correction best preserves an audit trail?
   1. A dated adjusting entry identifying the error, authority, and effect
   2. Deleting the original entry permanently
   3. Changing the original timestamp
   4. Replacing the bank statement image
10. A payment is offered to an unlicensed person for negotiating price with a buyer. The brokerage should:
    1. Pay it as a gift instead of a commission
    2. Refuse payment for licensed activity and document the issue
    3. Pay it if the consumer agrees
    4. Call it advertising without examining the service
11. Which statement about brokerage compensation is most accurate?
    1. Every market has a government-set standard rate
    2. An MLS establishes the minimum consumer commission
    3. Compensation is negotiable and should be stated through lawful agreements
    4. The payment source always determines agency
12. A closing email suddenly changes wire instructions. The safest response is to:
    1. Use the new instructions because the email looks urgent
    2. Reply to the same email for confirmation
    3. Forward it to the client without comment
    4. Verify independently through trusted contact information before action
13. Why is agreement between the bank balance and books insufficient by itself?
    1. Beneficiary ledgers may reveal one person's funds covering another's shortage
    2. Bank statements are never used in reconciliation
    3. Trust accounts do not need journals
    4. Only tax returns determine trust balances
14. A broker receives unusual noncash consideration with an offer. The best general response is to:
    1. Treat it exactly like cash without disclosure
    2. Identify its nature and follow the agreement and current disclosure/deposit rules
    3. Place it in the operating account
    4. Guarantee its value to the seller
15. Which control best reduces the risk that one employee can conceal a trust-account theft?
    1. Allow that employee to receive, post, disburse, and reconcile alone
    2. Turn off bank alerts
    3. Separate custody, recording, authorization, and reconciliation where practical
    4. Stop retaining source documents
16. A commission dispute arises between an affiliated broker and the brokerage. The broker should:
    1. Take the client's deposit as payment
    2. Redirect closing funds personally
    3. Demand payment from an unlicensed assistant
    4. Use the brokerage agreement and lawful dispute process without touching trust funds
17. Which item is a source document supporting a trust disbursement?
    1. A signed mutual release or other verified authority
    2. A salesperson's undocumented memory
    3. An overwritten ledger balance
    4. A verbal guess by an unrelated vendor
18. A property manager plans an owner distribution that would leave insufficient funds for recorded tenant obligations. The manager should:
    1. Distribute now because the owner requested it
    2. Stop and reconcile the owner, property, and tenant obligations before payment
    3. Move another owner's money temporarily
    4. Delete the tenant ledger
19. Which statement about agency and compensation is correct?
    1. The seller always represents the person paying commission
    2. A broker can never receive compensation from another source
    3. The source of compensation does not by itself determine whom the broker represents
    4. Agency exists only after the commission is paid
20. An exact Indiana record-retention period is uncertain. The broker should:
    1. Use the shortest period remembered from another state
    2. Destroy files after closing
    3. Rely solely on office custom
    4. Preserve the records and verify current controlling Indiana authority

Detailed Answer Explanations

1. A. Beneficial ownership and purpose determine whether money is held in trust. The payment form, expected closing, bank rewards, or salesperson's split does not answer that question.
2. B. Placing client or transaction funds in an operating account improperly mixes money belonging to others with brokerage funds. That is commingling even if the money is later returned.
3. C. Using another person's money for an unauthorized brokerage expense is conversion. The conduct may also produce commingling and a trust shortage.
4. D. Three-way reconciliation compares the adjusted bank balance, the trust cash balance in the books, and the total beneficiary-ledger balances.
5. A. Add the $1,500 deposit in transit and subtract the $300 outstanding checks: $14,800 + $1,500 − $300 = $16,000.
6. B. Beneficiary obligations exceed available trust funds by $50. Agreement between bank and books does not eliminate the shortage; it must be investigated without concealment.
7. C. A demand is not disbursement authority. The broker should protect the funds and follow the agreement, releases, court authority, and current state process.
8. D. The beneficiary ledger allocates the pooled trust-account balance to a specific transaction or person. Bank and journal records do not perform that ownership function alone.
9. A. A transparent adjusting entry preserves the original history and explains the correction. Deleting, overwriting, or changing dates damages the audit trail.
10. B. Negotiation is licensed activity. Changing the label to “gift” or “advertising” does not change the service that produced the payment.
11. C. Compensation is negotiable and should be documented. Government, competitors, associations, and MLS systems do not establish a standard consumer commission.
12. D. Changed wire instructions are a major fraud indicator. Independent confirmation uses known trusted contact information, not the potentially compromised message.
13. A. The pooled account can balance while a posting or disbursement causes one beneficiary's money to cover another. Subsidiary ledgers expose that problem.
14. B. Unusual consideration must be accurately identified and handled under the agreement and applicable law. It should not be treated as cash or guaranteed without basis.
15. C. Separation of duties makes concealment harder because no one person controls receipt, recording, release, and review. Small firms can use compensating independent controls.
16. D. A compensation dispute is resolved through the brokerage agreement and lawful process. Trust funds cannot be self-help for an affiliated broker's claimed commission.
17. A. A signed release or other verified authority connects the disbursement to the parties' rights. Memory, guesses, and altered records are not reliable authority.
18. B. The manager must protect all recorded obligations before distributing funds. One beneficiary's money cannot be used to satisfy another owner's request.
19. C. Agency is created through the relationship and law, not solely by who pays. Compensation sources still require agreement and any required disclosure or consent.
20. D. When a state-specific period is uncertain, preserve the records and consult current controlling authority. Guessing or early destruction can create an irreversible violation.

Mastery Checklist

• I can classify money by beneficial ownership.
• I can distinguish a trust account from an operating account.
• I can distinguish commingling, conversion, shortage, and posting error.
• I can trace the custody chain from receipt through disbursement.
• I can calculate and interpret a three-way reconciliation.
• I can respond properly to disputed funds and reconciliation exceptions.
• I can explain property-management fund controls.
• I can analyze compensation, referrals, rebates, and incentives without assuming a standard commission.
• I can distinguish verified Indiana trust and compensation rules from accounting, retention, and payment details still awaiting verification.
• I can score at least 80% and explain every answer.