Accounts: Their Construction and Interpretation for Business Men and Students of Affairs

By William Morse Cole | Go to book overview

CHAPTER SEVENTEEN
SOME GENERAL PRINCIPLES ILLUSTRATED IN TRUST ACCOUNTING

A TRUST may owe its origin to any one or more of several things. A trust company as well as an individual may be the administrator or the executor of an estate; it may hold property as guardian for a minor or an incompetent person; it may manage property for persons in ill health or abroad; it may take charge of marriage settlements; it may serve as assignee or receiver in bankruptcy proceedings; and it may serve many other similar functions. The chief peculiarity of trust accounting is that the books must show not merely how much property and income are to be accounted for in each trust, but what particular property belongs to it; for even though a trust fund is earning but little and the average earnings of investments held by the company are high, the beneficiary of the trust has no claim to the earnings of other trusts.

Each trust involves usually three elements,--principal sum, invested sum, and uninvested sum; and the amount of any one of these is likely to be at any time changed by income or loss. A trust ledger, therefore, must be so arranged that a page or a portion of a page allotted to each account shall show at a glance these three elements. A convenient arrangement for such a ledger is to have three separate groups of columns, one each for principal, income, and investment; the difference between the investment and the principal is the uninvested part. To make the record complete, a column for the debit and one for the credit is usually provided for each group, and for the sake of making immediate reference possible a balance column is also desirable for each. Such a ledger would look as follows:

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