Similarities and Differences Between Investment Accounting and Custodial Accounting

Similarities and Differences Between Investment Accounting and Custodial Accounting

Investment accounting is the management of finances of a company which has invested their funds in a variety of instruments and securities. On the other hand, custodial accounting is the management of the finances by a grown-up who represents a child. Each of these are specialized parts of the sector, and your regular accountants will not perform these functions (Also see Do You Need a Tax Accountant?). Investors should engage expert accounting firms in Singapore to handle these accounts.

Investment Accounting

It is not easy to make an informed financial decision. This can be very challenging when it comes to investing in the right investments at appropriate timing. Risks are everywhere, especially when some major players in the investment industry would track every action you take. Investment accounting includes not only record-keeping but also plan for future transactions about the financial investments they hold and any chances that might show up in the marketplace. A lot of people prefer to employ experts to ensure legal compliance and handle their investment portfolios (Also see Advantages You Can Get from a Simple Financial Analysis).

Custodial Accounting

Parents or guardians may want to give a sum of money to their children. However, they may save the money in a custodial account rather than keeping it in a typical bank account to make sure of the proper usage of that amount. When they deposit the funds in a custodial account, the child who owns the funds cannot spend the funds as he wishes, yet he needs the approval of the custodian, which is his parent or guardian. Sometimes, such accounts might be opened under certain conditions, for example, when the parents of the child pass away.


While both the accounts might seem to be very different, they have some similarities between them. Firstly, the most significant one would be both of them involve instruments and financial securities. Typically, the parents will deposit the funds in an interest-bearing bank account or an investment funds company. Thus, the primary purpose of each of these is to gain return or profit on the principle amount. Secondly, in both, someone else, but not the person who owns the funds (the principal beneficiary), will manage the funds. In investment accounting, the investment manager will manage the funds, whereas, in custodial accounting, the responsibility would be on the custodian.


The significant difference between them would be the people who would use them. Businesses would practice investment accounting, whereas families or individuals will practice custodian accounting. The purpose of the previous is to obtain returns for business purposes, whereas the latter is to assist children in obtaining money while they are still under supervision (Also see Is Opening a Business Bank Account Necessary?). Both of them are ruled under distinct regulations, and they have different needs as well as legal obligations for the recipient. There is a difference between forms of instruments too. This is because there are fewer choices available in custodial accounting when you compare it to investment accounting.

Another difference is that in investment accounting, the directors of the firm can employ an investment manager to secure the funds they have put into the investment. Contrarily, in custodial accounting, the customer can hire the custodian or any financial institution himself to manage his property and accounts. Besides, while investment managers develop financial assets within an investment portfolio, custodial accountant (Also see Four Typical Myths About an Accountant) deals with the paperwork and financial transactions of the client’s accounts.

Leave a Reply

Your email address will not be published. Required fields are marked *