[Accounting q]:- Unit Trust accounts in ledger?

[nathank]

hi folks,

I'm looking at using wave accounting to run the ledger for my fixed unit property trust. I'm looking for some advice on what accounts to setup for the starting balances of the ledger.

The FUT issued 100 units @ $3000 per unit (i.e. $300k) to purchase land for $100k and construction of $200k.

Question #1
I'm trying to get a feel for what the names of the accounts i should be using for the initial issue.

Question #2
With the initial issue, i'm unsure which accts to DR and CR. I think i have three initial transactions:
#1 - Unit issue (DR equity account? liability of the trust to the unit holder)
#2 - Purchase of units by unit holder (CR equity acct, maybe called surplus capital? that the building construction will draw down on)
#3 - Purchase of the land (DR surplus cap, CR land liability account?)

Any help / advice appreciated.

-nat

 

[alexlee]

h
#1 - Unit issue (DR equity account? liability of the trust to the unit holder)
#2 - Purchase of units by unit holder (CR equity acct, maybe called surplus capital? that the building construction will draw down on)
#3 - Purchase of the land (DR surplus cap, CR land liability account?)

Get an accountant. Please. For you sake.

1 and 2 happen together. You can't issue units unless it's purchased. So:

1+2) Dr Cash at bank 300, Cr Equity 300

3) Dr Land 100, Cr Cash at bank 100

The equity part is carried at cost and doesn't change.

 

[nathank]

Hi Alex, thanks for the quick reply mate. i'm a bit more confused now

The bank loan is between the unit holder and the bank, not with the trust. The unit holder borrows to buy the units and the trust gets the cash. what i thought was the cash received from the unit sale is then CR'ed into an equity ( surplus capital account) no?

I assumed that there is a corresponding outstanding liability to the unit holder for $300k? but unsure if this is against the equity account or a liability account?

Might be a daft question, but my university level accounting never covered unit trust accounting

 

[alexlee]

Hi Alex, thanks for the quick reply mate. i'm a bit more confused now

The bank loan is between the unit holder and the bank, not with the trust. The unit holder borrows to buy the units and the trust gets the cash. what i thought was the cash received from the unit sale is then CR'ed into an equity ( surplus capital account) no?

I assumed that there is a corresponding outstanding liability to the unit holder for $300k? but unsure if this is against the equity account or a liability account?

Might be a daft question, but my university level accounting never covered unit trust accounting

Actually the cash passes from the bank to the unit holder, and the unit holder buys the units from the trust. There is no liability account, because there is no loan between the trust and the unit holder. The relationship between the trust and the unit holder is equity only.

Please don't try to do this yourself. At home or anywhere else. Your question isn't daft, just clueless. You clearly don't understand double entry book keeping. That's fine, you don't have to, but you need to hire someone who does.

 

[coastymike]

Worse you start recording things to loan accounts instead of equity and ato argues that you loaned funds for a private purpose as you have no corresponding on lending agreement and interest.is non deductible. Could.end.up in a real mess

 

[nathank]

ok, advice taken