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Jan. 31, 1922 Transfer of excess income to Undivided

Estate (Schedule No. 24)...

Jan. 31, 1922 Balance (Schedule No. 1).

Total

230.00 None

$6,230.00

The opening balance of income cash should be shown as the first item on the schedule of receipts. (See Schedule No. 21.) The closing balance of income cash, with the location of the deposit and the number of the pass-book, should be shown as the last item in the schedule of disbursements. (See Schedule No. 25.) It is essential that in the case of each trust the total of the schedule of receipts equal the total of the schedule of the disbursements.

If there have been any sales or purchases of assets for the account of income, as in the case of Entry No. II on the synoptic of the suppositional trust which we are considering, additional schedules of such purchases and sales and of the inventory of such assets now held must be added for the trusts affected. These schedules will be in the same form as the similar schedules of principal.

REVIEW QUESTIONS

1. What form of trustee's report is used in your state?

2. At what value are trust assets carried on the books?

3. Is it necessary to close the books to make a report? When the books are finally closed, what will be the entries?

4. Why should there be an index to the trustee's report?

5. What should be shown on the first schedule? When are the figures obtained for this schedule?

6. What arithmetical steps are needed to ascertain the amount of the principal of a trust at any time? What is the purpose of the schedules that deal with the principal?

7. What is the object of the inventory schedules? What are the headings? What should go under each?

8. What goes in the schedules of sales?

9. What goes in the schedules of purchases?

10. How are the changes in cash during the year shown? In Investments account? In the principal? What is the object of these reconciliation statements?

11. What do the schedules of income show? Why must they balance?

CHAPTER LXXV

ACCOUNTING BY TRUST COMPANIES

§ 684. Separate Books for Each Estate Impossible

It must be admitted that the ideal accounting system for fiduciaries is to have an individual set of books for each separate estate represented. In the case of trust companies acting as fiduciaries, however, this is impracticable because of the great amount of labor which would be required if a separate set of books were kept for each of the large number of estates for which the average bank or trust company acts. When an individual is acting in a fiduciary capacity it is strongly recommended that a complete set of books be kept, separate from all other business, but for banks and trust companies it is necessary to devise a system of accounting which will retain the most valuable advantages of the individual sets of books and yet eliminate all unnecessary details.

§ 685. Systems in Use by Trust Companies

The method of handling individual trustees' accounts outlined in the previous chapters is equally adaptable for trust companies. All transactions are handled through the synoptic, and are posted to the trust ledgers in the usual way. For the sake of uniformity the same forms are used by trust companies and trust departments of banks in all their fiduciary functions, including administratorship, executorship, and trusteeship.

Form 31 shows the rulings of synoptics in use by two such companies. It will be noticed that the first of these is what is known as a "double-page form." The upper section is the left-hand page, the lower is the right. The use of the synoptic

has been explained fully. In examining Form 31 it must be remembered that each of these companies uses the same form of sheet for the trust ledger as for the synoptic.

There is presented in the following sections another type of system. The forms suggested and explained in connection therewith will be found adapted to the use of the trust departments of the vast majority of banks and trust companies.

§ 686. The Control Sheet

Form 32a is the control sheet. When the estate is taken over, all the assets should be entered in the column headed Inventory at the appraised value. If this is not available the market value as of the date of death of the decedent may be used temporarily, or if neither is available a nominal value of $1 may be accepted. The correct value should, of course, be obtained at the earliest possible moment and an adjusting entry made to carry the items at this value. The total of the entries which up to this point are all credits to corpus should be carried over to the column headed, Corpus-Credit Balance.

As additional assets of the estate are taken over the same kind of entries will be made in the same way. It will be noticed that the only entries to be made on this sheet after the inventory are those which affect the corpus of the estate either by way of an increase the result of the sale of an asset at a profit over inventory price (or occasionally the discovery of an uninventoried asset)—or a decrease, the result of the sale of an asset at a loss, or the payment of a debt of the decedent, the payment of a corpus expense, or the payment of a bequest.

Such changes in the amount of the corpus are provided for as follows: All expenses of administration, the payment of all debts of the decedent and all payments to beneficiaries should be entered in the column headed, Distributions, Expenses, and Debts-Debit. Any loss incurred in a sale of an asset should be entered in the column headed, Decrease-Debit. In the

same way the amount of profit realized in the sale of an asset above the appraised value should be entered in the column. headed, Increase-Credit.

Each entry made in these columns is the result of a change in the amount of corpus, and its effect must be shown by inserting on the same line in the Corpus-Credit Balance column the new corpus. This will be the previous balance less the amount of the new entry if it is a debit or plus its amount if it is a credit.

It will be evident that, since the only entries that are made on this sheet are those which affect the corpus of the estate by increasing or decreasing it, the entry for the sale of an asset should, so far as this sheet is concerned, show only the amount of profit or loss and not the amount at which the asset was originally inventoried.

Form 32a is designed to be used in administratorships and executorships. When a bank or trust company is acting as a trustee, either of an estate or under a voluntary trust agreement, Form 32i may be used. Except for the additional information called for at the top of the latter form, it is to all intents the same as Form 32a, and all the entries suggested in this chapter for Form 32a are equally applicable for Form 32i if that is substituted.

§ 687. Bank Balances Schedule

On Form 32b are entered all bank accounts which the decedent had during his lifetime, including savings bank accounts. These items were, of course, entered on the control sheet as a part of the original inventory. The control sheet, however, will not show their reduction or complete collection, as it shows only changes in the amount of corpus. When these assets are collected, entries recording this fact will be made in the credit column of the bank balances schedule. The headings of the other columns are self-explanatory.

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