November 9 | Chapter 8!

WORK THE SUMMARY PROBLEMS FOR THIS CHAPTER!!!



Fiduciary Funds

Agency fund is only fund that might be slightly different than others.

Fiduciary means that you are holding something for someone else

No issuing bonds, no earning revenue


Pension Trust Fund - retirement for government employees. This is where the money is put into for the pension plan

  • with this there has to be a pension agreement under local law, there needs to be an agreement between employee and government

  • Two types of pensions: 1)Defined Benefit Plan: the government invests money on behalf of the employee and GUARANTEES them with a defined benefit with they retire. 2) defined contribution plan: this is where the employee contributes to the pension. The employee can decide where it is invested (like a 401K).Actuary: person who predicts how long someone will live.


Investment Trust Fund - this is where one higher level of government invests money for a lower level of government. State has a ton of counties, those counties send money to the state, the state then invests it, then when income is made from either interest or selling that money is distributed

  • County is a legally separate from the state. | a lot of investments in this funds we are accounting for fmv increases and interest off of that and how its paid down


Private purpose trust fund - a citizen may set up a trust through the government for a specific purpose.

  • OUTSIDE the government, we are dealing with some sort of citizen.

  • There MUST be a trust agreement


Agency fund - this is simply just a funnel, it is in and out. Money is due to something, then it is paid back out.

  • one level of government is acting as a custodial for another level of government

  • ***different than the other three: NO statement of change in net position. NO NO NO. ONLY a statement of net position. Equation is Assets = Liabilities. Any money funneled in has to funnel out. Cash dr, due to cr.


That accounting for this funds: what are they doing with he money? - they are investing it

  1. Accrual basis of accounting. NOT MODIFIED LIKE IN GOVERNMENTAL TYPE FUNDS

  2. Economic resource measurement focu

  3. No budgets to put into the system (like governmental)

  4. No ENCUMBRANCES

  5. No terms “revenues” or expenses, (maybe expenses in investment). Additions and deductions are used instead. Additions are credits, deductions are debits

  6. Two statements: 1) statement of changes in plan net position (includes the additions and deductions, like an income statement). 2) statement of plan net position (like a balance sheet, listing of assets and Liabilites with plan net position instead of equity | assets = liabilities + plan net position ).

  7. Journal entries as normal, and CLOSING journal entires. Additions into deductions, difference goes into net position.

  8. Potentially has long-term assets. Will depreciate. (GO BACK AND LOOK AT THE TYPES OF DEPRECIATIONS). MAINLY WILL SE INVESTMENTS.

  9. Investments may need to be adjusted to its fair market value (FMV).



EXAMPLES:


P8-1: Pension Trust Fund Exmaple also therir perspective

Increase in the fund is an addition

1)

CASH 750,000

—Addition - GF | 491,250

—Addition - employee | 258,750


2)

Investment - Corporate Stock 500,000 |

—Cash |500,000


3)

First sentence:

Cash 210,000

—Investment income receivable 210,000


Cash 4,290,000

Investment income receivable 510,000

—investment income addition | 4,800,000


Cash 850,000

—Addition dividends 850,000


4)

Deduction - retirement benefits 3,500,000

—Cash 3,500,000


5)

Investment - U.S. government securities 1,100,000

—Cash 1,100,000


6)

Deduction - cost of plan 175,000

—Cash 150,000

—accrued expenses 25,000


Accrued expenses 12,000

—cash 12,000


7)

Cash 600,000

—investment - U.S. government securities 500,000

—addition - investment income 100,000


8) adjust to fmv

Investment - corporate stocks 1,000,000

—addition net increase in fmv 1,000,000



P8-3: investment trust fund


1) investments have to be tracked SEPERATELY!!!!

Cash 125,000

—addition - Clarksville 75,000

—addition - kingsville 50,000


2)

Investment in CDS 65,000

Investment Treasury Notes 60,000

—Cash 125,000


3)

Cash 37,500

—addition in interest income 37,500


4) maturity

Cash 71,000

—Investment CDS 40,000

—Investment treasury notes 30,000

-addition interest income 1,000


5)

Investment i CDS 70,000

—cash 70,000


6)

Cash 17,500

—additional interest income 17,500


7)

Deduction admin 500

—cash 500


(If not cash, we would put it into due to the GF)


8)

Deduction clarksville 30,000

Deduciton kingsville 20,000

-Cash 50,000


50,000×0.4=20,000




P8-6: Private Purpose Trust FUnd

1)

Cash 2,000,000

—addition gift 2,000,000


2)

Investment in cd 2,000,000

—cash 2,000,000


3)

Cash 100,000

Addition interest income 100,000


4)

Investment in cd 100,000

—cash 100,000


5)

Cash 101,000

—investment in cds 100,000

—addition interest income 1,000


6)

Cash 112,000

—addition interest income 112,000


7)

Deduction scholarships 65,000

—Cash 65,000


8)

Investment income receivable 2,300

—addition interest income 2,300


9)

Deduction managing 2000

Deduction admin 1000

—due to general fund 3000