Dictionary / Fiduciary
What does Fiduciary mean in accounting?
Quick definition
GeneralAny person responsible for the custody or administration, or both, of property belonging to another; as, a trustee. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
A cashier's check payable to you as executor
You run a tile showroom. On September 12 the probate court names you executor of your brother's estate, and on September 18 a credit union mails a $27,400 cashier's check payable to you as executor. You are the fiduciary: you have custody of property that is not yours. Do not deposit it to the showroom operating account and accept Other income in QuickBooks Online. Open or use an estate checking account and keep that deposit out of the shop file so September profit does not jump $27,400.
An estate pays your moving invoice
You run a two-truck moving company. On January 6 you invoice $3,260 to empty a house, billed to the decedent's estate, and on February 2 a check arrives signed by the executor. She is the fiduciary of that estate, not you. In Xero, apply the payment to the open invoice so accounts receivable decreases $3,260 and checking increases $3,260. Do not add a Fiduciary account, and do not start keeping her estate books in your moving file.
Why it matters
A fiduciary is the person who has custody or administration of property that belongs to someone else, such as a trustee, not a ledger method and not the same as fiduciary accounting, which is how those assets get their own books. You will not use this most months; it shows up when a will, trust, or court order puts you in charge of assets that are not yours, or when someone you invoice is acting in that role. Mix their cash into your operating file as sales or owner draws and you overstate income and lose the trail of money you must later turn over. Add a Fiduciary account because a check memo names an executor and you invent a line the chart of accounts does not need.
Further reading
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What is Fiduciary in bookkeeping?
Any person responsible for the custody or administration, or both, of property belonging to another; as, a trustee.
When should I use Fiduciary?
Use Fiduciary when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Fiduciary?
Fiduciary is used for fiduciary entries, while F.O.B covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.