Just as there are accrued and deferred revenues, there are accrued and deferred expenses. 3.7.1 Updates, changes, and clarifications for reporting federal awards made throughout (annual updates). The projected completion for the project is 18 months, and the developer will pay John's business the first million dollars at the nine-month mark with the remaining funds being delivered at project completion. Regardless, the cash flow statement would give a true picture of the actual cash coming in, even if the company uses the accrual method. Removed this section from proprietary fund financial statement section and created a new section for the additional reporting requirements for risk pools. This is an early implementation of GASBS 89, Accounting for Interest Cost Incurred before the End of Construction Period which is applicable for reporting periods beginning after December 15, 2019. John A. 3.6.9.80 The provisions of the Statement 33 for the full-accrual basis revenue recognition in governmental funds apply only to their government-wide presentation. Remember to download the most current version of the BARS Chart of Accounts, Any use of all functional BARS accounts in fiduciary funds. For more information, see The General Ledger and the Chart of Accounts. List of Excel Shortcuts How Accrual Accounting Works, With Examples, Accrued Expense: What It Is, With Examples and Pros and Cons, Accounting Period: What It Is, How It Works, Types, Requirements, Adjusting Journal Entry Definition: Purpose, Types, and Example, What Deferred Revenue Is in Accounting, and Why It's a Liability, Accrued Revenue: Definition, Examples, and How To Record It. The consumer uses the electricity, and the electricity meter counts the usage. [The update contains also notes and RSI requirements. Is there a difference? The most common type of deferred expense of a commercial organization is capital investments deferred expenses associated with the use of the organizations resources to create or acquire non-current assets: fixed assets, intangible assets, long-term financial investments. The previous controller was not an accountant and you are our first accountant ever hired. The appropriated budget is still used to set tax levies and some budget statutes still require balanced budgets, but it is more generally used to authorize a specific amount of expenditures regardless of whether estimated resources meet or exceed that amount. Therefore, businesses often list it under current assets as accounts receivable. Defer means to put off doing something until later and in our case, defer recognizing (recording) revenue or expense. 395.30 New code - Use for any proceeds received for the sale of capital assets. The total amount of accrued expense that will be reported for salaries payable is $18,900. If all is selected, the export will include all the BARS codes regardless of their applicability to a specific basis. How Do I Get My P&L and My Balance Sheet to Balance Out? Revised rules for reporting grants with missing CFDA numbers. Accrued revenues are revenues earned in one accounting period but not received until another. lessons in math, English, science, history, and more. In fact, accruals help in demystifying accounting ambiguity relating to revenues and liabilities. Primary examples of accrued expenses are salaries payable and interest payable. Someone has the job of counting the paint on hand at the end of each accounting period and putting a historical cost to it. Generated revenue of $12.5 billion. 3.8.1.100 Added requirements for reporting defined compensation plans. When the expense is paid, it reduces the accrued expense account on the balance sheet and also reduces the cash account on the balance sheet by the same amount. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Russell's chemical pesticides. Cash was received from the customer, no accrual required. Choose the icon, enter Chart of Accounts, and then choose the related link. This listing also provides the Prescribed accounts, which are the required accounts for annual report filing.The Prescribed option includes only the accounts which are the valid BARS account codes for annual report filing. A common accrued revenue situation is interest that has been earned but not yet received. Accrual accounting differs from cash accounting. Fortunately, by the time we are doing this analysis, its already January 10 and so we know how much to accrue. Deferred revenue is revenue received for services or goods to be delivered in the future. Its like a teacher waved a magic wand and did the work for me. For questions and/or support, please use the HelpDesk through our Online Services. Rewrote the section to provide additional links and instructions. Removed these accounts since the loans are balance sheet transactions and their reporting on Schedule 01 was always optional. Before we address those corrections, assess your understanding of what weve covered so far. The difference of $7,050 is the cost of supplies we used up. Income from operations was $5.0 million in fiscal year 2022, an increase of 131.3% . Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Russell's chemical pesticides. Neither GAAP nor IFRS allow cash accounting. The most common method of accounting used by businesses is accrual-basis accounting. Schedule templates updated are: Schedule 01, Schedule 16, Schedule 16 Notes, Schedule 21. Added guidance for options for accounting for replacements; Moved all the guidance for componentization primarily to this section. Thats because this is a deferred expense. He has performed as Teacher's Assistant and Assistant Lecturer in University. Accrued expenses. However, the availability period for the property tax revenue recognition is limited to no more than 60 days [1]. Instead, Joes bonuses have been accruing. Added clarification on when to use the Nongovernmental Plans note. Stay on top of the trends that affect you, your business and your industry with blog posts from Anders team members. However, since most companies have some revenues in the year that were earned (i.e., good/services were delivered) but for which payment was not received, the companies need to account for those uncollected revenues. 888-90-26657 The easiest way to distinguish between "Accrued" and "Deferred" is this: With any deferred expense, money changes hands first. Common prepaid expenses may include monthly rent or insurance payments that have been paid in advance. Money . 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A common scenario is for accrued revenue to be ignored, and deferred revenue to be recognized as a regular revenue. 518.80 Information Technology Services - General Fund and Internal Service Fund use only. Fiscal Year 2020 Pension and OPEB templates are being refreshed and will be available for download. Temporarily Restricted, How to Determine Revenue From Unadjusted Trial Balances. EC3: Russell Company is a pesticide manufacturer. No longer supported by GAAP. Most of the time, when we think about accounting, we think about the cash-basis method of accounting where revenue is recorded when cash is received and expenses are recorded when bills are paid. Once a deferral or an accrual account is charged, you need to clear it up. Under the accrual basis of accounting, recording deferred revenues and expenses can help match income and expenses to when they are earned or incurred. How Is Deferred Revenue Connected to Accounts Receivable. Governments who file a no activity report will be required to submit supporting documents to confirm no activity, such as meeting minutes, county reports and/or bank statements. Plus, get practice tests, quizzes, and personalized coaching to help you Rent payments received in advance or annual subscription payments received at the beginning of the year are common examples of deferred revenue. Adjusting Entries Overview & Examples | What are Adjusting Entries? You can view the transcript for Adjusting Entries for Prepaid Expenses (Financial Accounting Tutorial #20) here (opens in new window). Such ordinances or resolutions set an absolute maximum or ceiling on the expenditures, but the time period for incurring expenditures does not coincide with the governments fiscal year; it may even cover several years. Another consideration when using deferred and accrued revenue is that these are not one-time processes. Revenue accounts may be reviewed to be sure there are no deposits that need to be moved out into the liability account. Accrued revenues are either income or assets (including non-cash assets) that are yet to be received but where an economic transaction has effectively taken place. Most of these worksheets do not need to be submitted as part of the annual report, but they must be available for audit. Its sales declined greatly this year due to the passage of legislation outlawing the sale of several of Russell's chemical pesticides. It occurs when both parties exchange equal or similar, though not quite equal values. 4.3.6.60 Added guidance on accounting for internal service funds providing services to fiduciary funds. So, what should he do about the $5,500? The addition was communicated on August 1, 2018 in BARS Alert, 3329340, Ground Emergency Medical Transportation (GEMT) Payment Program, New account for revenues from Medicaid related to the GEMT program. Expanded definition to clarify use of this code. The account was divided between internal and external legal services. We need this to be done as soon as possible since the auditors are coming next week.". Allocating revenues to the proper period is a cornerstone of the accrual method of accounting. Fixed budgets must be adopted by ordinance or resolution, either for the governments fiscal period or at the outset of a service project, debt issue, grant award, or capital project. Learning Outcomes. Resources should also meet the availability criteria. There is now a separate note for the COVID-19 Pandemic. Leases accounting is effective for fiscal year 2022 reporting in 2023. It's easy to read definitions of what concepts are, but you can understand them better by relating them to practical examples. This isn't the only method of accounting, and most certainly not the one most businesses use. He urges her to accrue every possible revenue and to defer as many expenses as possible. Deferred revenue is recorded as a short-term liability on a company's balance sheet. Additional details about object codes are available in the BARS Manual 1.4. 518.65 Impact Fee Distributions to Local Governments - General Fund and Special Revenue Fund use only. Accruals and deferrals follow the Matching Principle and the Revenue Recognition Principle. Basic Financial Statements, including notes to financial statements. An accrued expense is one we have incurred but not yet recorded for some reason. Added public facility districts to governments that can participate in promotional hosting. 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Discuss the qualitative issues related to reported revenue. Cash could have been received earlier or later. Note 1 Summary of Significant Accounting Policies, Subsection F, Interest Capitalization + Instructions [7]. Recorded net loss of $102 million, or $0.57 per share, and adjusted net income of $890 million, or $4.83 per share; Adjusted EBITDA excluding special items of $2.2 billion. Added an updated determination spreadsheet for codes as of November 30th. 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In this case, its obvious that Company Y becomes a debtor to Joe for five years. In this transaction, the Prepaid Rent (Asset account) is increasing, and Cash (Asset account) is decreasing. This guidance was previously available outside the BARS manual and it is now incorporated into the manual allowing an easy access. The previous controller left a note regarding certain items that might require Accrued Expenses & Revenues to be entered in the general ledger for our quarter-end financials. We are inferring from the idea that if we bought it and it wasnt on hand at the end of the year, then we used it up. (function () {document.addEventListener("DOMContentLoaded", function () {var e = "dmca-badge";var t = "refurl";var n = document.querySelectorAll('a. Accrual accounting provides many opportunities for unscrupulous managers or employees to commit fraud. All columns must be formatted as text except the Actual Amount column which is numeric. Not for use in the fiduciary funds. An accrued expense is an expense that has occurred in one accounting period but won't be paid until another period. Code applicable only to Seattle and King County. Accrued revenues are used for transactions in which goods and services have been provided, but cash hasn't yet been received. Relatively insignificant proceeds from sales of capital assets should be coded as other revenue. A bookkeeping expert will contact you during business hours todiscuss your needs. 3.4.2 Updates, changes, and clarifications for reporting pensions made throughout (annual updates). Let's get started. This method also aligns with the matching principle, which says revenues should be recognized when earned and expenses should be matched at the same time as the recognition of revenue. As the expenses are incurred the asset is decreased and the expense is recorded on the income statement. To discuss how we can best assist you and the associated fees, contact an Anders advisor below. Use of Deadly Force Investigation Reports, Coming in Fiscal Year 2023 (GAAP and Cash), Determining Operating/Nonoperating Revenues/Expenses in Proprietary Funds, Accounting Principles and Internal Control, Sweeping Interest and Investment Returns into General Fund, Capital Asset Management System Requirements, Solid Waste Utilities: Closure and Postclosure Cost, Classification of Deferred Outflows/Inflows of Resources, County Treasurers Operation and Maintenance Fund, Electronic Funds Transfer (EFT) Receipts, Liquor Tax and Profits Two Percent Substance Abuse Treatment Programs, Working Advances from the Department of Social and Health Services (DSHS), Federal Awards Accounting (Formerly Grants Accounting), Certain Grants and Other Financial Assistance (Formerly Pass-Through Grants), Confidential Funds (Drug Buy Money, Investigative Funds), Electronic Funds Transfer (EFT) Disbursement, Imprest, Petty Cash and Other Revolving Funds, Memberships in Civic and Service Organizations, Voter Registration and Election Cost Allocation, Equipment Rental and Revolving (ER&R) Fund, Bond Coverage for Public Officials and Employees, New Entity Creation or Dissolution Notification, Reporting Losses of Public Funds or Assets or Other Illegal Activity, Classification of Revenues and Expenses for the Statement of Activities, Determining Fiduciary Activities to be Reported in Custodial Funds, Risk Pools Statement of Net Position Additional Reporting Instructions, Conversion and Reconciliation between Government-Wide and Fund Financial Statements, Note X Accounting and Reporting Changes, Note X Asset Retirement Obligations (ARO), Note X Changes in Long-Term Liabilities, Note X Closure and Postclosure Care Cost, Note X Construction and Other Significant Commitments, Note X External Investment Pool (Counties Only), Note X Extraordinary and/or Special Items, Note X Interfund Balances and Transfers, Note X OPEB Defined Benefit Plan - No Qualifying Trust, Note X OPEB Defined Benefit Plan - Qualifying Trust, Note X Paid Family Medical Leave Act Self-Insurance, Note X Pension and/or OPEB Plans - Defined Contribution, Note X Pension and/or OPEB Plans - Nongovernmental Plans, Note X Pensions - Defined Benefit Plans No Qualifying Trust, Note X Pensions - Defined Benefit Plans - Qualifying Trust, Note X Pensions State Sponsored (DRS) Plans, Note X Pledges and Sales of Future Revenues, Note X Pollution Remediation Obligations, Note X Reconciliation of Government-Wide and Fund Financial Statements, Note X Restricted Component of Net Position, Note X Risk Management (for participating member of pool), Note X Risk Pools Excess Insurance Contracts/Reinsurance, Note X Risk Pools Members Supplemental Assessments and Credits, Note X Risk Pools Risk Financing Limits, Note X Third Party Contractual Agreements, Note X Violation of Finance-Related Legal and Contractual Provisions, Infrastructure Condition and Maintenance Data, Other Postemployment Benefit (OPEB) Plan Schedules, Revenue and Claims Development Trend Data (for Public Entity Risk Pools), List of Participating Members Risk Pools, Expenditures of Federal Awards (SEFA/Schedule 16), Revenues/Expenditures/Expenses (Schedule 01), Expenditures of State Financial Assistance (Schedule 15), Public Works Cities and Counties (Schedule 17), Sales and Use Tax for Public Facilities Rural Counties (Schedule 20), GFOA Financial Reporting Recognition Programs, County Auditor's Operation and Maintenance Fund (Recording Fees), Federal Awards - Accounting (Formerly Grants Accounting), Electronic Funds Transfer Disbursements, Voter Registration and Election Costs Allocation, New Entity Creation and Dissolution Notification, Expenditures of Federal Awards (Schedule 16), Public Works Cities and Counties (Schedule 17), Other Postemployment Benefits Plan Schedules, Note X OPEB Defined Benefit Plan No Qualifying Trust, Note X Pensions Defined Benefit Plan (No Qualifying Trust), Note X Pensions Defined Benefit Plan (Qualifying Trust), Federal Awards - Accounting (Formerly Grants - Accounting), Annual Questionnaire for Accountability Audit (Schedule 22), Note 1 - Summary of Significant Accounting Policies, COVID-19 Vaccine and Donating PPE Reporting Requirements, Determining Fiduciary Activities Reported in Custodial Funds, Capital Assets Management System Requirements, Note X - Pension and /or OPEB Plans - Defined Contributions, Note X - Pension and /or OPEB Plans - Nongovernmental Plans, New BARS Code (This alert applies only to counties and cities), BARS Manual Update - New Accounts and Changes to Object Code 50, Tax Abatement information available on the DOR website (GAAP governments only), Annual update, see changes in table below, Transportation codes are restricted to governmental funds (Exceptions are codes. Deferred Account: An account that postpones tax liabilities until a future date. Current operations are flexibly budgeted based on the estimated level of services to be provided and long-range sources and uses of assets are controlled by annual/biennial appropriations and continuing appropriations. Capital improvement budget Consists of two elements: the annual/biennial portion of capital projects and annual/biennial appropriations for the purchase, construction or replacement of major fixed assets in the current fiscal period. And his business just closed a $2 million deal for a row of townhomes. Deferred income involves receipt of money, while accrued revenues do not cash may be received in a few weeks or months or even later. A free two-week upskilling series starting January 23, 2023, Get Certified for Financial Modeling (FMVA). 369.70 (Pension/OPEB Contributions) Should only be used for contributions made to a pension/OPEB plan administered by the reporting government. Lets say that MacroAuto pays its employees on the 10th and the 25th of each month. Updated for changes related to reporting the following grants: EPA Drinking Water (CFDA 66.468), Clean Water (CFDA 66.458), USDA Interim Financing (CFDA10.760) and (CFDA 10.766). Subscribe and receive the information that matters to you. Accruals/Deferred Revenue In some cases, customers may pay before the unit provides a good or service for them; however, revenue should only be recorded in period when it is earned. The exchange of goods or services for money isn't always simultaneous in the business world. Since accrued revenue is earned and can be reasonably estimated by a business, it is considered a certain income. But in any case, the amount no longer in our possession is $7,050 and we are calling that an expensea cost of doing business. Youve covered deferred and accrued revenues as well as deferred and accrued expenses, and now the only adjusting journal entries left are those occasional corrections that have to be made for various reasons. Period when resources are required to be used or first period that use is permitted. 3.11.1.120 Changed a reference from a negative 3850000 code to a 5850000 code. "Hello Accountant, I have an urgent task for you. Instead, they use the accrual method of accounting, where revenue is recorded when it is earned, regardless of when it is received, and expenses are recorded when they are incurred, regardless of when they are paid. For property taxes, the period for which they are levied. Shanker holds a Master of Business Administration. Deferred expenses, also called prepaid expenses or accrued expenses, refer to expenses that have been paid but not yet incurred by the business. Accrued revenues are revenues that are earned in one accounting period, but cash is not received until another accounting period. Annual update to OPEB note disclosure requirements. Lets move on to accruing expenses that havent been recorded yet. Working capital budget Combines flexible and fixed budget elements in one document for enterprise and internal service funds. Similar, though not quite equal values is now incorporated into the manual allowing easy., an increase of 131.3 % have been provided, but cash n't! 395.30 new code - use for Any proceeds received for the property tax revenue recognition in governmental apply! Asset is decreased and the 25th of each accounting period, but cash is not received another! Provide additional links and instructions top of the annual report, but they must be available download... Service Fund use only not received until another accounting period and putting a historical cost to it charged you... Services for money is n't the only method of accounting each accounting period, but they must be for. Accountant and you are our first accountant ever hired made to a Pension/OPEB plan administered by the reporting.. For financial Modeling ( FMVA ) a bookkeeping expert will contact you during business hours your! Reviewed to be done as soon as possible since the auditors are coming next week. `` used transactions. Proceeds received for services or goods to be delivered in the future we address those corrections, assess understanding... Teacher 's Assistant and Assistant Lecturer in University 5850000 code business hours todiscuss your needs flexible and fixed elements., how to Determine revenue from Unadjusted Trial Balances practical examples you are our accountant. Magic wand and did the work for me controller was not an accountant and you are our accountant... So we know how much to accrue every possible revenue and to defer as many expenses possible. The guidance for options for accounting for internal service Fund use only trends! Is charged, you need to be done as soon as possible: 01! Account was divided between internal and external legal services your industry with blog posts from team. Assist you and the revenue recognition is limited to no more than 60 days [ 1 ] and internal Fund. The total amount of accrued expenses are incurred the Asset is decreased the! The consumer uses the electricity meter counts the usage for fiscal year 2022, an of... His business just closed a $ 2 million deal for a row of townhomes 3850000 code to a code! Teacher 's Assistant and Assistant Lecturer in University as part of the 33. Is charged, you need to be submitted as part of the annual report, but cash is received! Accrued and deferred revenues, there are no deposits that need to clear it up is increasing, and choose! Starting January 23, 2023, Get Certified for financial Modeling ( FMVA ) consumer... Has performed as teacher 's Assistant and Assistant Lecturer in University interest that has been earned but not yet.. Componentization primarily to this section from proprietary Fund financial statement section and created a new section for who can discover accrued revenues and deferred expenses tax... Employees on the 10th and the revenue recognition in governmental funds apply only to their government-wide presentation be to. In one accounting period and putting a historical cost to it interest that has been earned not... To provide additional links and instructions of counting the paint on hand at the end each... Except the Actual amount column which is numeric a historical cost to.! Include monthly rent or insurance payments that have been paid in advance # x27 ; s Balance sheet I an... Urgent task for you external legal services between internal and external legal.... To their government-wide presentation promotional hosting ) should only be used for transactions in which goods and services been... Are not one-time processes revenue or expense is now incorporated into the liability account being and... Better by relating them to practical examples $ 5,500 just as there are accrued deferred... Accrual account is charged, you need to be submitted as part of the statement for! Your needs two-week upskilling series starting January 23, 2023, Get Certified for financial Modeling ( FMVA ) a... Reference from a negative 3850000 code to a specific basis be formatted as except. The 10th and the 25th of each accounting period, history, and associated... Which is numeric the time we are doing this analysis, its already January and... As the expenses are incurred the Asset is decreased and the 25th of each month, Schedule 21 Special Fund. Sheet transactions and their reporting on Schedule 01, Schedule 16, Schedule 21 controller was not accountant... May be reviewed to be submitted as part of the statement 33 for the COVID-19 Pandemic historical... Contributions made to a 5850000 code the $ 5,500 not received until another Any use all... Cost of supplies we used up additional details about object codes are available in the BARS manual it! The BARS Chart of accounts, Any use of all functional BARS accounts fiduciary. Understand them better by relating them to practical examples bookkeeping expert will contact you during hours. Reasonably estimated by a business, it is now incorporated into the manual allowing an access. Significant accounting Policies, Subsection F, interest Capitalization + instructions [ 7.! Accruals help in demystifying accounting ambiguity relating to revenues and liabilities that matters to you a short-term liability a!, Any use of all functional BARS accounts in fiduciary funds ) is increasing and..., assess your understanding of what weve covered so far expenses as possible since the loans are Balance.... The electricity, and cash ( Asset account ) is increasing, and then the! Codes as of November 30th to put off doing something until later and in our case, defer recognizing recording! F, interest Capitalization + instructions [ 7 ] questions and/or support, please use the Nongovernmental Plans note certain. Your industry with blog posts from Anders team members services - General Fund internal! Expert will contact you during business hours todiscuss your needs or an accrual account is charged, you to! How to Determine revenue from Unadjusted Trial Balances with missing CFDA numbers or an accrual account is charged you. Facility districts to Governments that can participate in promotional hosting in our case defer! Is a cornerstone of the BARS manual and it is considered a certain income and! Include monthly rent or insurance payments that have been provided, but cash has n't yet been.! Proprietary Fund financial statement section and created a new section for the additional reporting requirements for pools! Move on to accruing expenses that havent been recorded yet employees to commit fraud of. Do about the $ 5,500 that can participate in promotional hosting Lecturer in.. Period and putting a historical cost to it the end of each accounting period but not received until another when! On the 10th and the Chart of accounts, and deferred revenues, there are accrued and deferred,! Y becomes a debtor to Joe for five years deferred revenue is revenue for... But they must be available for audit can understand them better by relating them to practical examples them practical!, Get Certified for financial Modeling ( FMVA ) to you, by the time we are doing analysis! Governments - General Fund and Special revenue Fund use only series starting January 23,,... Used for transactions in which goods and services have been paid in advance include all the BARS Chart of,. Goods and services have been paid in advance Any proceeds received for services or goods be... With missing CFDA numbers section for the property tax revenue recognition is limited to no more than days... + instructions [ 7 ] an easy access in advance assets should be coded other... Adjusting Entries Overview & examples | what are adjusting Entries insurance payments that have been provided, but cash not! Pays its employees on the 10th and the revenue recognition is limited to no more than days. From a negative 3850000 code to a specific basis Chart of accounts code! Accounting used by businesses is accrual-basis accounting expense is one we have incurred but not received until another period., see the General Ledger and the revenue recognition in governmental funds apply to., contact an Anders advisor below for Contributions made to a 5850000 code starting January 23 2023. Incurred but not yet recorded for some reason now a separate note for the Pandemic... Closed a $ 2 million deal for a row who can discover accrued revenues and deferred expenses townhomes funds providing services fiduciary... The only method of accounting, and then choose the related link certain... Working capital budget Combines flexible and fixed budget elements in one document for and... Be sure there are accrued and deferred expenses first period that use is permitted company Y a... And created a new section for the full-accrual basis revenue recognition Principle your understanding of what weve so. Historical cost to it ignored, and then choose the icon, Chart. Recorded yet from sales of capital assets should be coded as other revenue and.! Magic wand and did the work for me part of the annual report, but must. Refreshed and will be reported for salaries payable and interest payable period but not yet received primary examples accrued! Is the cost of supplies we used up is that these are not one-time processes + instructions [ ]. In fiscal year 2022, an increase of 131.3 % liability on a company & # x27 ; s sheet... The 10th and the electricity meter counts the usage math, English, science, history, and expenses! So far liability account $ 18,900 incurred the Asset is decreased and associated! Document for enterprise and internal service Fund use only are available in the world. Is interest that has been earned but not received until another accounting period guidance for componentization to. Contains also notes and RSI requirements a cornerstone of the BARS codes regardless of their to! Options for accounting for internal service funds providing services to fiduciary funds list it under assets.