Question

Which of the following is not a primary reason that a trust department maintains its trust accounting records separate from the commercial banking records?

a. State law requires that trust books and records be segregated from the bank's books.
b. Commercial bank accounting systems do not have the sophisticated tickler systems that are required by statute for trust departments.
c. Trust systems must account for principal and income separately, which is required by law for some trust accounts.
d. Trust systems assist in administrative and investment management functions.

Answer 1

The incorrect option is the claim that commercial bank accounting systems lack sophisticated tickler systems required by statute for trust departments; this is not a primary reason for maintaining separate trust accounting records. State law and legal requirements for account separation, as well as the specialized administrative and investment management functions of trust systems, are the true primary reasons.

Step-by-step explanation:

The primary reason that a trust department maintains its accounting records separate from commercial banking records is not because commercial bank accounting systems do not have sophisticated tickler systems as required by statute for trust departments. The separation is mandated because state law requires that trust books and records be segregated from the bank's books (state law), and trust systems must account for principal and income separately, which is legally required for some trust accounts (legal requirement).

Additionally, trust systems are designed to assist in administrative and investment management functions, which are unique to the needs of trust management and may not align with the functions of commercial banking systems. The history of commercial banks and the evolution of demand deposit accounts illustrate the distinct roles these institutions have developed to serve different financial needs in the economy.