Client management

What are 'Clients' in CCH Trust Accounts?

CCH Trust Accounts produces accounts for 'clients'. A client in Trust Accounts usually corresponds to your concept of a client. For CCH Trust Accounts it is normally the trust; for estate accounts, the estate; for Charity accounts the charity and so on. However, there are exceptions to this approach. For instance, if each beneficiary receives a set of accounts showing their assets, liabilities and details of their income, it is usually easier to set the beneficiary up as a client in their own right.

For high net worth individuals it is often not necessary to produce a set of accounts. In this case the individual would also be set up as a client. This type of client would be set up to have an investment ledger but no nominal ledger.

Removing the option for a nominal ledger speeds up Data Entry as no nominal account codes are required. If the link to CCH Personal Tax is being used, a client in CCH Trust Accounts usually corresponds to a client in CCH Personal Tax. However if a separate set of accounts is being produced for each beneficiary then the CCH Personal Tax client corresponds to the SA900 form (i.e. to the trust), while the Trust Accounts client corresponds to the beneficiary. When CCH Personal Tax is linked to CCH Trust Accounts, multiple accounts clients can update a single CCH Personal Tax client.

Setting up a new Client

The following steps are usually taken in setting up a new client if it has a Nominal ledger:

1. The client is created and the first accounting period is defined as running from a very early date (e.g. 01/01/1930 up until the last year end). This is defined the first time you select the client in the client list after creating the client.

The This Year and Last Year dates form the posting window for Investment ledger transactions in the first period in Trust Accounts to allow the full Investment History to be entered if required. the Trial balance will be entered as at ;

2. The Balance Sheet is coded up and posted as a journal to the Balance Sheet accounts with the following changes:

• The balance on the Capital Account is posted to the Capital Account B/Fwd. Similarly the balance on the Income Account is posted to Income Account B/Fwd. If either of these accounts are split by beneficiary then the posting needs to be split by beneficiary.
• The balance on the Investment ledger (i.e. Investments at cost as per the investment schedule), is posted to the Suspense Account.

3. The individual holdings are then ‘bought from the Suspense Account’. In other words a series of investment purchases are made with the Logged-In Account set as the Suspense Account. The idea is to recreate the capital history of the holding so that the CGT is correct on subsequent disposals. At the end of this process the Suspense Account should have a zero balance and all the cost should have been transferred to the Investment Cost account. There are a number of variations on this process depending on circumstances.

• It is not necessary to write up every purchase and sale, only the ‘unmatched acquisitions’ (i.e. acquisitions unmatched by a subsequent disposal). Also for transactions prior to 17/3/98 it is only necessary to write up the value of the 1982 pool and the s104 pool using one transaction for each pool. So if the pool values and subsequent unmatched disposals are available (e.g. from another CGT system), then just these transactions can be written up, greatly reducing the number of necessary entries. This is usually done using movement codes:
  • P82 - 1982 pool
  • P98 - s104 pool
  • ACQ - Acquisition
• However, the source data may not come from a CGT system. In this case it may be necessary to enter the full history or possibly estimate the balances at 17/3/98 and enter the full history since. If purchases and sales are entered, this results in a profit on disposal being posted. At the end of the process the Investment account shows the correct cost, but the Suspense Account does not zero and an opposite balance is shown on the profit on disposal account. An extra journal is needed between these accounts.
• Sometimes producing the accounts is the top priority and there is not enough time to write up the full capital history, so you enter just an opening balance for each holding which is correct for accounting purposes. Then later on when there is a quieter period you go back and delete the opening balance and replace it with the full history. Trust Accounts allows this even though all the entries are before the start of the current year. These entries are referred to as Prior Year Entries. After a Year End, adding or deleting Investment ledger entries has no further effect on the Nominal ledger. So as long as the new entries give the correct CGT position then the data is correct.

4. Finally, a Year End is performed which produces the correct opening Trial Balance.

When are Nominal Accounts needed

Nominal accounts are needed for three purposes:

• Producing accounts – The Accounts Formatter can only pick up balances from accounts on the Trial Balance, it cannot display individual entries. Usually the Accounts Formatter is used to produce all the accounts apart from the Investment Schedule and possibly a Dividend Schedule. So if the accounts show a list of bank accounts or a list of payments to beneficiaries then each item in the list needs to be a separate nominal account.

If a long list of transactions is required (e.g. if a long list of payments to beneficiaries is required), then it may save time to post all the payments to a single account and attach a nominal ledger print to the accounts. This could be quicker than setting up a new account for every payment.

However most users would set up one account for each beneficiary and show just the total paid to each beneficiary without the date of payment.

• Control purposes - Some nominal accounts are used for control purposes even though they do not appear in the final accounts. The most obvious example is the Suspense Account. By the time the accounts are produced this account should have a zero balance. Another example is the Income Bank Account. Some users check the Income Bank Account to determine whether there is enough cash available to make a distribution to the income beneficiaries. However the accounts themselves often show only the total bank account balance (i.e. for both income and capital).
• Tax purposes - Sometimes figures are needed for the purposes of tax return preparation which can be most easily obtained when the accounts are prepared by using separate nominal accounts. For instance, if UK tax returns are being produced without using the link to PerTAX then some users post Dividends from UK Unit Trusts to a separate account.

Normally the Income and Expenditure Account shows only ‘Income from investments per schedule’. The figure for Dividends from UK Unit Trusts is only used for tax return production. However most of these accounts are no longer necessary as the system can determine the nature of investment income by looking at the security.

So a general rule is that nominal accounts are mainly used for producing the accounts with extra accounts occasionally used for control or tax purposes.

Keeping the chart of accounts simple is likely to reduce posting errors.