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Writer's pictureShivraj D

Mutual and Hedge Fund Accounting - INCOME PROCESSING, Can be important for Interview



Goal

To ensure income from equity and fixed income securities is correctly accrued in the fund for valuations .


General Process

Income from Equity – Dividend Income

➢ Run the Dividend Activity in System

➢ Check the results in the Dividend System

➢ Tie out dividend income/expense to trial balance

➢ Answer all dividend related alerts on NAVAlert


Income from Fixed Income – Interest Income and Amortization

➢ Run Income Book

➢ Tie out interest income/expense to trial balance

➢ Answer all income related alerts on NAVAlert


Control/Procedure

Income from Equity – Dividend Income

➢ Check to ensure all dividend setups are with the appropriate Apps record (confirmed and second-sourced by Client Provided). If not, ensure appropriate research is completed and necessary backup is included


Income from Fixed Income – Interest Income and Amortization

➢ Check to ensure all fixed income securities e securities are set up with the correct accrual and amortization parameters in APPLICATION .

➢ Check to ensure all variable rates are up-to-date

➢ Check to ensure all daily changes and income hits are reconciled


Accounting entries :


Fixed Income Security Interest Accrual

Dr Interest Receivable A/c ............xxxx

Cr Interest Income A/c................xxxx


Dividend Income Accrual

Dr Dividend Receivable A/c...............xxxx

Cr Dividend Income ..................xxxx


Income Tax Accrual

Dr Interest or Dividend Tax Expense ...........xxxx

Cr Interest or Dividend Tax Expense Accrual ......xxxx


Fixed Income Discount Amortization

Dr Cost of Investment – Fixed Income A/c...........xxxx

Cr Amortization Income A/c.........xxxx


Fixed Income Premium Amortization

Dr Amortization Income A/c.........xxxx

Cr Cost of Investment – Fixed Income A/c...........xxxx


Note:- These are the all possible entries for the Income Process , but you may expect the many more entries as well in below cases .

Income Received in Advance

Outstanding Income

Accrued Income - we have covered already

Or could be any other case a part from the above .


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