What Is a Feeder Fund?

An enterprise fund refers to a special purpose fund drawn from profits by state-owned enterprises in accordance with conditions and proportions prescribed by the state. Enterprise funds are essentially a form of profit distribution for the state and state-owned enterprises. As early as the 1950s, state-owned enterprises have generally implemented enterprise fund systems. It has been implemented intermittently since then. In November 1978, the State Council approved the Ministry of Finance's "Provisions on Pilot Enterprise Funds for State-owned Enterprises" and decided to fully implement the enterprise fund system. The extracted enterprise funds were mainly used for employee rewards, organized collective welfare undertakings, employee training and supplementary production technology. Costs of measures, etc. The extraction method is: 5% of total wages in the case of the company's annual plan of eight economic indicators and supply contracts, including production, variety, quality, material consumption, labor productivity, reduction of comparable product costs, profit, occupation of working capital Withdrawal of corporate funds. ^[1]

Enterprise Fund

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An enterprise fund refers to a special purpose fund drawn from profits by state-owned enterprises in accordance with conditions and proportions prescribed by the state. Enterprise funds are essentially a form of profit distribution for the state and state-owned enterprises. As early as the 1950s, state-owned enterprises have generally implemented enterprise fund systems. It has been implemented intermittently since then. In November 1978, the State Council approved the Ministry of Finance's "Provisions on Pilot Enterprise Funds for State-owned Enterprises" and decided to fully implement the enterprise fund system. The extracted enterprise funds were mainly used for employee rewards, organized collective welfare undertakings, employee training and supplementary production technology. Costs of measures, etc. The extraction method is: 5% of total wages in the case of the company's annual plan of eight economic indicators and supply contracts, including production, variety, quality, material consumption, labor productivity, reduction of comparable product costs, profit, occupation of working capital Withdrawal of corporate funds. ^[1]

The characteristics of enterprise funds are drawn according to a certain ratio of total wages. Its advantage is that it is convenient for the leading organs to control the total amount of funds by industry and unit, and it will not cause disparity in funds between enterprises due to different construction objects and good or bad equipment. The disadvantage is that the total salary of the enterprise's employees is used as the basis for calculating the enterprise fund. The more employees there are in the enterprise, the more funds will be withdrawn, which is not conducive to the improvement of labor productivity. ^[2]

New activities are recorded as enterprise funds, or activities of existing enterprise funds are usually expanded by the following methods: ^[3]

1. Transfer from General Fund. Funds transferred from the General Fund are recorded as inter-fund transfers. The accounting entry of a corporate fund is a debit to cash and a credit to a transfer account.

2. General fund loan. For general fund loans, the general fund debits corporate receivable funds and credits cash. Corporate funds are debited to cash and credited to the general fund (liability account). If the loan comes with interest, the corporate fund incurs interest expenses and the general fund receives interest income.

3 Issue of income bonds. Income bonds are issued by enterprise funds, and bond interest and principal payments can only be made using the income from operating activities recorded in the enterprise funds. (If the issuance of a bond is secured by the fixed assets of a corporate fund, the bond is called a mortgage income bond.) Revenue bonds can only be recorded in a corporate fund. Because bond trust deeds often require bond proceeds to be used for a specific capital account, bond proceeds are usually deposited in a separate checking account, such as a construction fund account. The use of separate accounts facilitates accounting control to ensure that funds are used for designated projects. When a separate account is established, the credit for the corresponding accounting entry is an income payable bond.

4 Issue general liability bonds. General liability bonds are issued by government agencies with government credit and guarantees. Bond proceeds are transferred to corporate funds and the funds are used in accordance with the provisions of the bond trust deed. According to the source of funds used to repay principal and interest, general liability bonds are divided into the following two categories:

a. General liability bonds repaid with corporate funds. When government agencies are to use corporate fund income to pay principal and interest, the GASB coding rules recommend that the debt be used as a liability for corporate funds.

b. General liability bonds repaid with tax and general income. When government departments are required to pay principal and interest with tax and general income, the liabilities generated by bonds are recorded as liabilities in the GCA-GLTL general ledger. The enterprise fund will process the funds received between funds, and the accounting entry will be credited to the transfer account. This way the corporate fund does not reflect this liability.