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Introduction for the MFM Orientation - page 7 / 14

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Investment Accounting

Investment accounting generally uses single-entry bookkeeping on a mark-to-market basis with a daily close

In place of the dual aspect accounting identity, we have

net assets = net cash +

price · quantity

holdings

Note the liquidity assumption: Unlike in normal microeconomics, price here does not depend on quantity.

cash enters and leaves the portfolio through subscriptions and redemptions or dividends

cash also changes through transactions which create or modify holdings

net cash is adjusted for unsettled trades, taxes payable, and accrued interest and fees

Measurement Concepts for Banking Trading and Investing

John Dodson

Introduction

Outline

Financial Accounting

Double-Entry Bookkeeping

Financial Statements

Investment Accounting

Performance Measurement

Active Return

Securities Conventions

Trading Terminology

Cases

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