Fund accounting tracks a fund's value for its investors. The headline number is net asset value, or NAV: total assets minus liabilities, divided by the number of units. It is calculated daily from holdings, market prices, income, expenses, and money flowing in and out. Every piece must reconcile, because investors buy and sell at the NAV.
Pieces of the daily calculation
- Holdings valued at current market prices, with stale prices flagged instead of silently reused.
- Income accrued, such as interest and dividends, even when the cash has not arrived yet.
- Expenses accrued, including management fees, so the NAV reflects costs as they arise.
- Investor flows: subscriptions add money and units, redemptions remove both, on the correct day.
When the NAV moves unexpectedly, check flows and price changes before suspecting an error. Both move the number for legitimate reasons.