What is Fiduciary Accounting?
Fiduciary accounting has both general and specific connotations. In the broad sense, the term refers to the management, as performed by a trustee or guardian, of the financial assets placed in their care. This trusted individual is charged with preserving and maintaining the estate for the beneficiaries involved. All banking, investing and expense transactions must be well-documented and recorded by that individual. Periodically, financial reports are prepared to disclose the state of affairs to date. The information must be accurate, clear and useful to the interested parties.
The more specific definition of fiduciary accounting refers to the actual compiling of all data and preparing of the financial disclosure statements. Particularly when required by the Probate Court, these formal reports are often referred to as 'the accountings'. The fiduciary accounting must adhere to strict guidelines as specified by State Probate Codes.
Another distinguishing feature of fiduciary accounting is that the reports are prepared from the point of view of the beneficiaries involved. Preservation of assets and equitable distribution among recipients are of primary importance. This requires a very different accounting structure than is utilized in the typical business world.
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