You may have heard of fiduciary accounting. Terms like fiduciary accounting software and fiduciary trust accounting software are commonly used. In a broad term, the term can refer to a process wherein a fiduciary—normally a personal representative, trustee or guardian—communicates information on an ongoing basis with regard to the financial administration of a fund to the parties in interest and, perhaps, to a court. This information will also be used to support the fiduciary’s administration of the fund. It can be said that it may be the process whereby a fiduciary—here more often a trustee—periodically keeps the principals informed of transactions and investment policies that are being followed.Because fiduciary accounting can come under scrutiny from the IRS or the courts, precision, accuracy, and careful documentation are absolutely necessary. Specific knowledge of any accounting protocols which apply to the fund in question is also needed.
Fiduciary accounting follows a few principles. Here are the six principles of fiduciary accounting.
- Accounts should be stated in a clear manner which is transparent to people who are unfamiliar with practices and terminology specific to the administration of estates and trusts.
- A fiduciary account must begin with a concise summary of its purpose as well as content.
- A fiduciary account shall contain enough data to put the interested parties on notice as to all important transactions affecting administration during the accounting period.
- A fiduciary account shall include both carrying value, which are representing the value of assets at acquisition by the fiduciary, as well as current values at the beginning and also the end of the accounting period.
- Gains and losses incurred during the accounting period must be shown separately. They should be shown in the same schedule.
- The account should document significant transactions which do not affect the amount for which the fiduciary has responsible over.
Since it is of a sensitive nature fiduciary accounting should be performed by a CPA or the equivalent.Your accountant/accounting service should nevertheless be able to draw upon institutional knowledge of fiduciary accounting. Fiduciary accounting software is an accounting software system for attorneys, accountants, fiduciaries, and others who serve estate, trust, and guardianship clients. It produces fiduciary reports in a visual way with a logical and common sense approach. There are many types of fiduciary trust accounting software available in the market nowadays that make the job much easier.