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Fund Account - Kindly Help - Urgent

Rahul (.) (303 Points)

16 June 2010

Dear Friends,
Currently I am doing the audit of an educational institution. They are having a lot of earmarked funds and a lot of corresponding FDs.(The previous year audit was done by another auditor).
1) As per the last balance sheet the total of funds and the corresponding FDs differ ... Should it be the same..?
2)How should I treat the current year interests received.. What are the entries... ?
3)How to make the entries for the payments made out of the fund?
KINDLY HELP

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2 Replies

Siddarth R Sunder Ram (Finance Professional) (230 Points)
Replied 17 June 2010

For current year interest recd, you must debit the FD a/c and credit Interest a/c, and then transfer the Interest a/c to the Fund a/c (assuming that the fund is on cumulative basis).

For payments out of the fund, debit the relevant expense/asset a/c and credit the bank a/c.

As far as the difference in FD and fund balance is concerned, it could be due to the entire amt of the fund not being invested or FDs being partially withdrawn. Since the previous audit has been done by some other audit, you may have to verify the transactions relating to the fund and the FDs.

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CA Mukul Mittal (CA in practice) (384 Points)
Replied 18 June 2010

get a previous audit report and ask the management for the respective difference......
same as told above
whenever entries are to b made p&l or income over expenditure is t/f to fund a/c........

entry wll be : expense a/c dr. to cash/bank/ creditor & expense to b t/f to p&l or i/e a/c