A fiduciary is someone who is in a position of trust. In fiduciary accounting, a trusted person is required to keep detailed financial records when administering a trust or when acting as the executor of the estate of a deceased person. The fiduciary may also be managing assets for a minor child until he or she reaches the age of majority. The records may be filed with the court as part of a legal proceeding, and it is essential that they be accurate.
A trust is made up of the principal, which is the original amount of the cash or other assets that are placed within it, and income. Any capital gains are added to the principal, while expenses and capital losses incurred are deducted from this amount. Any debts incurred by the trust are also subtracted from the principal.
The fiduciary accounting statement lists the principal, as well as any income the trust or estate received. The income may be in the form of interest or dividends earned on investments. Income is listed separately on the accounting statement, since the beneficiaries for each form of income may be different, depending on the terms of the trust or the individual's will.
If any portions of the assets held in the trust or forming part of the estate were sold by the administrator or the executor, the fiduciary accounting statements must show the "book value" of the property as well as the selling price. The gain or loss is noted in the records. This figure may be used to for calculating capital gains or capital losses.
Any income made by the trust or the estate is listed in order, by date and type of receipt. This method of showing the records makes it easier for anyone reviewing the fiduciary accounting statements to see if any statements are missing. Receipts for rent, interest payments or dividends received would be used for this purpose.
Any payments made from the trust or the estate are listed in the fiduciary trust accounting statements. These may include expenses incurred in administering the trust or settling the estate. In the case of a trust, any income paid to beneficiaries is listed and the documents end with the remaining balance.
Once the fiduciary accounting statements have been prepared, copies are provided to interested parties, as well as the Court in some cases. The recipients of the statements are given the opportunity to object to any of the items they contain. If no objection is registered, the fiduciary can distribute the proceeds from the trust and the money and property that forms the estate.