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ch08web - CHAPTER 8: Answers to Questions 8-1. ACCOUNTING...

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CHAPTER 8: ACCOUNTING FOR FIDUCIARY ACTIVITIES- AGENCY AND TRUST FUNDS Answers to Questions 8-1. Although in law there is a clear distinction between an agency relationship and a trust relationship, in practice the legalistic distinctions are not sufficient to classify funds as agency funds or trust funds . As the introduction to Chapter 8 explains, the name given the fund is not a reliable criterion for identifying the types of transactions in which the fund may engage. All factors, such as the enactment that created the fund and pertinent regulations, must be examined to determine the nature of the fund and the transactions in which it may engage. Generally, trust funds are more complicated than agency funds, requiring greater representation and development of the beneficiary’s interest. 8-4. When an agency fund is used to account for assets, the assets belong to the party or parties for whom the government acts as an agent, and not to the government itself. Thus, agency fund assets are offset by liabilities equal in amount and no fund equity exists. Solutions to Exercises and Problems
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This note was uploaded on 04/08/2008 for the course AC 456 taught by Professor Parsons during the Spring '08 term at Alabama.

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ch08web - CHAPTER 8: Answers to Questions 8-1. ACCOUNTING...

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