Trust Accounting

For the purpose of our system, Trust Accounting means using one bank account to handle the banking for more than one building. Most regulatory agencies require that the bank balance for each building be clearly distinguishable. SPECTRA handles this requirement using Trust Accounting, so let’s discuss what this means.

If each building has its own bank account, then no trust accounting is done.

It is important to emphasize here that we are talking about individual bank accounts, not the physical location of the bank. If you have 20 accounts with the National Bank to manage 20 buildings, then you are not doing trust accounting. If you have one account (for which you receive one bank statement) to manage those 20 buildings, then you are using trust accounting.

If you are interfacing to another accounting software package you do not need to use trust accounting, just set each building up in SPECTRA with its own bank account.

In Trust Accounting there is a building or property setup that holds the bank account. This property is referred to as either the Trust Department" or "Finance Department" or "Head Office Building". We will refer to it as the Finance Department.

Trust Accounting uses some special General Ledger accounts (called Due To/From accounts) when posting cash receipts and disbursements. These Due To/From accounts do not have to be in your chart of Accounts, as the system will add them if and when they are required. E.g. If you set up your Finance Department first in the Property Wizard and then setup the individual buildings that use that Finance Department, the system will automatically set up the Due To/From accounts in both buildings. The Due To/From account is specified when you are setting up the Bank, from within the Property Wizard, all you need to do is specify a General Ledger account number for the system to use.

Here’s an example:

Lets say that you set up a bank called "Trust Bank" that is in your Finance Department that has the Building ID "Fin". The Bank's General Ledger number is 1010 and you specified 1090 as the Due To/From account. You also have setup 3 buildings that will use this bank account, and their Building ID's are 001, 002, 003. The Finance Department GL will look like this:

1010 Bank

1090.001 Due To/From (points to Bldg 1)

1090.002 Due To/From (points to Bldg 2)

1090.003 Due To/From (points to Bldg 3)

You will notice that in the Finance Department the Due To/From sub accounts point to the individual buildings. In the Individual buildings the bank account number is not needed and the Due To/From sub account points back to the Finance Department.

1010 Not Needed

1090.Fin Due To/From points to Finance Department)

We have a Finance Department for our Bank account for all our buildings, and a tenant in Building 002 pays his rent. The accounting is:

Acct # Dr. Cr.

Cash Receipt Entry done by you:

Trust Bank Fin.1010 $1,235.00

Building 002 Receivables 002.1100 $1,235.00

Automatic entries done by the system:

Finance Dept Due to/from Bldg 002 Fin.1090.002 $1,235.00

Bldg 002 Due to/from Finance Dept 002.1090.Fin $1,235.00

As you can see, the Due to/from entries keep each property or building in balance, and when you look at Building 2, the Due to/from behaves as if that building had its own bank account. It reflects that Building’s contribution to the general bank account.As shown above, the system will do these entries to the Due to/from account automatically if the entries were made through the Receipts or Check programs. Journal entries will not update the Due to/from accounts, but will be reflected in the Interdepartment account numbers.