A business money market fund reinvested its distribution

Confirm whether the business holds a money market mutual fund or a bank money market deposit account. The names sound similar, but the records and risks differ. The SEC explains that money market funds pay distributions and are not FDIC-insured bank deposits. Use the actual fund and custody documents to establish what the company owns.

Record the legal holder, fund name, share class, custodian and statement period. Agree the opening shares and value with the previous reconciliation. This guide concerns the records for an existing holding; the company's investment policy and authorized advisers should govern whether the product is suitable for its cash needs.

A reinvested distribution can increase the holding without producing a bank deposit. Locate the distribution advice and the associated share purchase in the statement. Record their dates, amounts and references separately, then connect them. The absence of an operating-bank receipt does not establish that no income or investment activity occurred.

Ask the accountant to determine the appropriate recognition and measurement under the company's reporting framework. If income has already been accrued, reconcile the distribution against that schedule. Do not recognize both the accrual and the full distribution as new income without reviewing the relationship.

Check whether the distribution election applies to all holdings or only a particular share class. A custodian may hold cash distributions in a settlement account rather than transfer them to the operating bank. Identify the actual destination instead of assuming every distribution was reinvested.

Roll opening shares forward through purchases, redemptions and reinvested distributions to the closing share count. Reconcile the statement value separately, using the fund's actual valuation information. The SEC describes both stable- and floating-value fund structures, so avoid assuming every holding always has a unit price of exactly one dollar.

For a hypothetical reinvestment, a $120 distribution used to acquire additional shares needs both the income or accrual settlement and the acquisition recorded under the accountant's policy. The share quantity follows the actual purchase price and rounding shown by the custodian. Do not calculate a presumed quantity and overwrite the statement's confirmed trade.

Identify fees, adjustments and any withholding separately. Explain differences between the gross distribution and the amount reinvested. A net increase in the investment balance can combine several events, so retain the detailed activity rather than only the opening and closing values. Preserve any custodian correction notice with the affected transaction.

Match purchases and redemptions that reached the bank with the corresponding custody activity. Keep unsettled transfers separate from spendable operating cash. Obtain the product's actual redemption and settlement terms when management uses the holding in a liquidity report; an accounting balance does not establish immediate bank access.

Collect the custodian's year-end information statements where issued and provide a reconciliation to the financial books. Ask the tax preparer to determine the treatment of distributions and any differences from book recognition. Avoid classifying every fund payment as bank interest based on its commercial name.

Save the share roll-forward, valuation evidence and distribution records with the closing pack. Carry forward the verified holdings and any unsettled amounts. If the reinvestment election changes, record the authorized instruction and confirm the first subsequent distribution follows it.