Keeping account

The keeping of accounting records can appear at first glance to be a formidable task. This need not be so even for those with no previous accounting experience. This section is designed to ease any fears about the difficulty of compiling the required records.

Choosing an accounting method

  • Some clubs are fortunate enough to have an accountant among their ranks, who may volunteer to keep the club’s financial records.  Other clubs that are not in that position may want to consider getting an accountant’s help to set up the books, even if an external accountant is not used to maintain the club’s records on an ongoing basis.
  • The accountant can set up a few basic templates for your treasurer to complete each month, making regular updates to the financial records a simple matter. This will also make things easier at year end when it comes time to complete the club’s tax return.
  • Your club is of course free to use any method it chooses. Indeed, at the outset some clubs may take an approach of simply making monthly contributions into the club’s bank account, and keeping a basic record of shares bought and sold. This approach has the advantage of simplicity, but cannot offer the more detailed information of a formal accounting system. Many clubs start in this way, and at a later date move to a more structured accounting system.
  • Whichever accounting method you select, it should be applied consistently and over the long term. It is vital that every member is treated fairly and openly, and the accounting method should reflect this intent. The two systems commonly used by investment clubs are the proportional system and the Unit Valuation System (UVS). To operate the many variations of the proportional system satisfactorily, a full understanding of accountancy techniques is required. Unless your club’s accounts are being kept by an experienced accountant, we recommend the use of the unit system.

Operating the Unit Valuation System

A summary of the UVS appears on the How Units are Valued page. The broad principles of the UVS should be understood by all members. The general accounting work, however, is usually done by the club treasurer. These pages, and the downloadable documents below, are a step-by-step guide through unit system accounting.

We consider the UVS to be satisfactory for all investment clubs irrespective of the size of their membership or the level of their investments.

The system depends upon the completion each month of four forms. This should soon become a simple and routine procedure, but it must be emphasised that these forms must be dealt with regularly and methodically. When dealing with other people’s money, full accountability must be maintained at all times.

The four forms which provide the framework for the UVS are:

  • Cash Account
  • Members’ Capital Account
  • Investment Record
  • Monthly Assets Statement

Documents to download

As well as explaining how to complete the accounting forms, the instructions also work through an example. You may like to print the ‘Example forms’ to refer to as you go through the instructions.

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