191. LIABILITIES Invoices Payable Vouchers and Pay Rolls Payable Warrants Payable Accrued Interest Temporary Loans in Anticipation of Taxes Due to Other Funds Total Liabilities SURPLUS: • Reserve for Stores, Work in Progress. Prepaid Expenses and Advances Excess of Cash Over Immediate Demands for Cash Reserves Excess of Other Assets Over Temporary Loans and Total Surplus, as per Surplus Account Below Total Liabilities and Surplus, General Account Exhibit 3 CURRENT OPERATIONS AND SURPLUS OR DEFICIT ACCOUNTS, YEAR ENDED. REVENUES: EXPENSES: Expenses (In detail according to functions or purposes) Excess of Revenues Over Expenses Excess of Expenses Over Revenues Year Ended 191. from above Surplus December 31, 191..., as per Balance Sheet, General Account Total Revenues (In detail according to sources) Excess of Expenses Over Revenues 191. above Excess of Revenues Over Expenses Year Ended 191. from Deficit December 31, 191. Account as per Balance Sheet, General Total This is really part of surplus, being included in surplus account in the general ledger, and not represented by a separate ledger account. Assessments Receivable Local Improvements in Progress Construction in Progress Lands, Buildings, Equipment, and Other Permanent Improvements Municipal Utilities Due from Other Funds Warrants Payable Assessment or Special Improvement Bonds BONDED DEBT Less Sinking Funds Applicable as per Statement Below DEBITS Estimated Revenues from Taxes and Miscellaneous Receipts Needed to Available Balance (Accounts Receivable) Unapplied (Net Cash) Balance (Excess of cash over immediate demands for cash) Total Debit Balances .191 Reserve for Retirement of Loans in Anticipation of Collection of Taxes Total Credit Balances Exhibit 7 FUND BALANCE SHEET-LOAN FUNDS (CAPITAL ACCOUNT) LIABILITIES Invoices Payable Vouchers and Pay Rolls Payable Warrants Payable Reserve for Public and Private Trusts: Intestate Estates Pension Funds Unclaimed Moneys Bequests and Legacies Total Liabilities and Reserves CHAPTER XXVII SPECIAL POINTS IN DIFFERENT CLASSES OF EXECUTORS AND TRUSTEES An audit of the accounts of executors or trustees properly begins with a careful reading of the will or deed of trust, as the provisions of these documents will have an important bearing on the actions of the executors or trustees as reflected in their accounts. While the apportionment of receipts and payments between capital and income should always receive attention in the auditing of trusts, it becomes extremely important under some wills and trust deeds. Having examined the documents from which the trustees derive their power, the auditor should next compare a certified copy of the inventory of the estate, which was filed with a court. of probate, with the trustees' books, to see that all the assets scheduled in the inventory have been entered in the books and at the appraised values. Should the trust have already been in existence for a considerable time and the audit not go back to its inception, it is desirable that the examination start with the date with which the most recent account approved by the court closed. The income from securities should be verified in detail. This can usually be very satisfactorily done; even if the securities are not listed on a stock exchange, information as to dividends or interest paid thereon can in almost all cases be obtained without much difficulty. Overdue interest on mortgages should be investigated. When examining the securities, which work is an important feature of the audit, the auditor should see that they are registered in the names of all the trustees, if there are more than one. If real estate has been committed to the care of the trustees, or if the will gives the executors the custody and disposition of the testator's real estate, the rentals therefrom will need to be verified and taxes and other realty expenses vouched. Vouchers should be submitted to the auditor for all payments. In verifying the correctness of the credits taken by the executors or trustees, the commissions paid or claimed should be carefully scrutinized. Their arithmetical correctness can usually be verified in total, but it is also important to see that the basis on which they were calculated is a proper one. Particularly must duplications of commissions be guarded against. If an executor becomes trustee of an estate after being discharged as executor, he will receive but one commission on the principal of the estate. Furthermore, a commission is not ordinarily allowed on changes of investments, though it is usually allowed on the net increase, if any, in the principal caused by such changes. The average rates of commission allowed executors and trustees of decedents' estates are two and one-half or three per cent on the principal and five per cent on the income handled, but rates vary, and in some States a sliding scale of commissions is in force. In the case of large estates, however, a different rate or a fixed amount of compensation is sometimes named in the will (frequently, no doubt, in pursuance of an agreement between the executor to be and the testator during the latter's lifetime), and by accepting the trust the executor binds himself to limit his commission in accordance with the stipulation in the will. Presumably, however, if the executor declined to serve and no one could be found who would be willing to accept the trust for the stipulated compensation, the probate court could appoint an administrator who would not be bound by this stipulation of the will, but would be allowed the ordinary rate of commission. In a complete audit of the accounts of a trust estate, the investments made by the trustees should also be reviewed from the standpoint of whether they were legitimate at the time they were made. The character of investments which are legal for trust funds vary in different States; generally they are first mortgages on real estate, Government (Federal, State, county, and municipal) bonds, and the first mortgage bonds of railroads having an established dividend record. The importance of a correct apportionment of all receipts and payments between principal and income has already been |