Chapter 30

FUNDS AND OTHER

INVESTMENTS
What is a Fund?
Fund
Cash or other asset set aside for a specific purpose
o Current
o Non-current
 Reason
o Management Decision
o Contractual or Legal Requirement
Types of Funds
Current Purposes Non-Current
oPetty Cash Fund oSinking Fund
oPayroll Fund oPreference Shares Redemption
oInterest Fund Fund
oDividend Fund oPlant Expansion Fund
oTax Fund oContingency Fund
oInsurance Fund
Measurement
Long-term fund
oAmount of cash + Cost of securities adjusted for discount or
premium amortization + Other assets in the fund
Sinking Fund
Liquidation of long-term obligation (bonds)
Accounting depends
oAdministration of the entity
oTrustee
Administration of the Entity
Entity records the fund transactions
Distinction whether the fund is currently in the form of cash,
securities and other assets
Administration of a Trustee
Fund transactions are not currently recorded by the entity
Individual transactions on purchase and sale of securities, and
earnings and expenses of the funds are recorded periodically by the
entity
There is no distinction on the composition of the fund
Use “sinking fund – trustee”
Sinking Fund Contribution
Voluntary or Mandatory
Contribution
End of each year
Advance
One-time
End of the year
Yearly Contribution =
_____Fund to be accumulated_____
Future value of ordinary annuity of 1
Advance
Yearly Contribution =
_____Fund to be accumulated_____
Future value of ordinary annuity of 1 in advance
One-time
Yearly Contribution =
_____Fund to be accumulated_____
Future value of 1
Preference Share Redemption Fund
Terms of the Preference share may be called in for redemption
Set-up fund insure eventual redemption