Fund Accounting

Fund accounting is that branch of accounting which is used for maintaining the accounts of Govt. My father was also accounting department of Govt. and he told me that main aim of maintaining Govt. accounts is show the proof of its completed projects. There is not any aim to use it as measure of profitability. Like this, we can also use fund accounting for not-for profit organisation and maintaining the accounts in which fund is kept under trust. Mutual funds and hedge funds are its main example. So, mutual fund accounting and hedge fund accounting is also part of fund accounting.

{A} Assets and Liabilities in Fund Accounting 

Assets may be in liquid form or in other assets like land, building, machinery and other fixed assets form. All these assets are bought by govt. or not-for-profit organisation through use of their fund. So, if there is no need of any asset, it can be also converted into fund by selling any asset.

Liabilities are the Govt. and Non-Govt. Organisation's obligations. It may loan which has been taken. It may be the specific fund which is collected but still it has not be used. But in assets and liabilities, there will not be any capital. Because both organisations are not doing business. But in case of trust, it may be associated with business projects. All these assets and liabilities are shown in the balance sheet.

{B} Expenses and Revenue in Fund Accounting

In fund accounting, all the expenses and revenues are recorded for operating the mission. For example, a Not-for-profit organisation has obtained the donation of $ 1 million. It will be one revenue source. Like this, there may be other resources of these organisation's revenue. All these revenues should be recorded. All expenses should also be recorded. Excess of Revenue over expenses will be the surplus which will become the fund for new projects. It will go to balance sheet's liability account.

Important Terms in Fund Accounting

1. Financial endowment

When a person transfer the money or anything to any not-for-profit organisation as donation. It will be financial endowment. One of important example is that a person gives his land for hospital.

2. Deposit funds

Deposit funds are not govt. fund but it is just used by govt. temporary basis.

3. Revolving funds

Funds which are created and used for business activities.


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Accounting Education: Fund Accounting
Fund Accounting
Accounting Education
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