Business
Business books are kept in terms of the accounting equation
Equity = Assets + Liabilities
and reports are designed to reflect the relationship between these components.
Business Audits are conducted regularly, for a variety of reasons. These may include determination of tax liability, dividend or share value, or the solvency and liquidity of the business. These audits rely on formal financial statements, prescribed by recognized international standards, such as GAAP, IAS or IFRS. It should be possible to obtain the required reports quickly and verify the information by cross reference.
Trust
Trust audits present a unique challenge.
Several challenges present themselves when dealing with trust books.
The first challenge is that trust books are not kept in terms of the traditional accounting equation.
Secondly, commercial accounting reports are not intended to reflect the different aspects of the trust.
The trust does not have Equity, it is only composed of
Assets = Liabilities
In order to simultaneously and accurately reflect the Trust and Business in one consolidated accounting system, we treat the trust separately, as trust assets and liabilities. The affairs of the business are correctly reflected in the standard accounting equation, with the trust added as extraordinary assets and liabilities.
DynamicLTA recommends the following THREE STEP TRUST RECONCILIATION approach:
- Match TOTAL trust ledger balances to TOTAL trust cash
- Verify trust cash books match trust banks
- Verify trust ledger integrity
This entire process is explained in the four part series on trust reconciliation.
Part 1: Three Step Trust Reconciliation
DynamicLTA makes keeping your trust easy!
-Dynamic