Institutions of this character usually have a large number of such endowments, and it is probably incon venient to carry the detailed record of each endow ment in the general ledger of the organization. In stead, a controlling account could be carried in the general ledger, and to this account should be credited the amounts which are donated to the institution for specific purposes and which are to be invested in fixed and non-productive assets. Supporting this account there should be a subsidiary ledger in which should be recorded the details of each gift, each ledger account containing a full and complete explanation of the terms of the gift. Money or property given to the institution, which is to be invested in income-bearing securities, could be handled in a similar manner; in other words, it should be credited to a controlling ac count in the general ledger and should be supported by a subsidiary ledger showing the specified conditions attaching to each gift contributed for the purpose of productive endowment.
As the gifts are invested by the trustees from time to time, the amount invested should also be carried in appropriate controlling accounts. There should be one controlling account for the investment of the non productive endowment, supported by its subsidiary ledger showing the details of the investment; and there should be another controlling account for the invest ment of the productive endowment, supported by sub sidiary records showing the details of the investments.
The following journal entries will illustrate the procedure as regards non-productive endowments, in cases of this kind. Of course, similar entries should be made for the productive endowment, for which the journal entries would be the same; the only difference would be the substitution of the word "productive" for the word "non-productive." As soon as the in stitution received the cash from John Smith's execu tors, the following entry should be made: Special Cash Funds $1,500,000 To Principal of non-pro ductive endowment S1,500,000 (John Smith Memorial Surgery Endowment) To record the receipt of this gift under the will of John Smith, which is to be used to erect a new surgical building to be known as the Smith Memorial Surgery.
Special Cash Funds $500,000 To Principal of produc tive endowment $500,000 (John Smith Memorial Surgery Maintenance Endowment) To record the receipt of this sum under the will of John Smith, which is to be used to create an endowment, the income of which is to be used for the maintenance of the Smith Memorial Surgery Building.
The foregoing journal entry indicates that the cash fund of $1,500,000 has been set apart in a restricted cash account and has been credited to the principal of non-productive endowment. The credits should also
be posted in the subsidiary record which is provided for the purpose of showing the detailed amounts that stand to the credit of each of the individual endow ments. The amount of $500,000 should be credited to the principal of productive endowment in like man ner.
We will assume that the trustees have immediately proceeded to erect the Memorial Surgery and that they have from time to time expended various sums, amounting to a total of $1,200,000. The journal en try necessary to record this progress would read as follows : Investment of non-productive endowment $1,200,000 (John Smith Memorial Surgery Building) To special cash funds $1,200,000 For the cost of the Smith Memorial Surgery Building.
The investment of non-productive endowment ac count constitutes a controlling account supported by a subsidiary ledger in which will be found the detailed accounts that show the investment of the respective non-productive endowments. It is possible at all times, thru the medium of the controlling account, to tell how much of the non-productive endowment has been invested and how much remains uninvested, since the difference between the total standing at the credit of the principal of non-productive endowment and the total standing at the debit of the investment of non-productive endowment will be the uninvested principal of non-productive endowment. This unin vested principal will be represented by cash in the spe cial cash fund, which is the cash account thru which all trust funds pass. In order to ascertain the details of the various endowments, and the portion of each which has been invested or which remains uninvested, it is necessary only to turn to the subsidiary ledgers.
The first step is to make a list of the principals of the various endowments. This can be compiled from the subsidiary ledger controlled by the principal of the non-productive endowment account in the general ledger. Then in a parallel column, an entry should be made of the details of the respective investment accounts that are shown in the subsidiary ledger con trolled by the general ledger account, "Investment of Non-Productive Endowment." The difference between these two sums should be carried to a third column which should include the uninvested portion of each individual endowment. The total amount shown in the third column will be the uninvested por tion of the non-productive endowment. This should be reflected in the special cash fund.