Mutual Fund Accounting and Reporting
Mutual fund accounting and reporting procedures help firms record accurate and complete financial data. Absent adequate procedures, the Securities and Exchange Commission may fine or bring litigation against a non-compliant company.
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Mutual Fund Defined
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A mutual fund is a financial institution that collects funds from clients and invests on financial markets with a profit motive.
Accounting Policy Significance
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Accounting policies are important for mutual funds because they may incur losses resulting from regulatory fines or investor lawsuits if they report misleading financial data.
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Asset and Liability Recording
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An asset is an economic resource, such as cash, stocks or bonds, that a mutual fund owns. A mutual fund accountant debits the asset account to record a new asset. A liability is a debt that a mutual fund must repay to a business partner. A mutual fund accountant records a debt by crediting the vendor payable account.
Revenue and Expense Recording
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Revenue indicates income or gains that a mutual fund earns through trading activities. A mutual fund accountant records revenue items by crediting the revenue account. An expense is a cost or loss incurred through operations or trading. A mutual fund accountant records expenses by debiting the expense account.
Financial Reporting
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A mutual fund accountant prepares four financial statements at the end of each quarter or year. These statements include a balance sheet, statement of income, statement of cash flows and statement of fund equity.
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References
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