Fund Accounting is a term used for investment accounting as well as non-profit accounting. With investments it is used as portfolio accounting or securities accounting. In this instance it describes the process of accounting for a portfolio of investments such as securities, commodities and/or real estate held in an investment fund such as a mutual fund or hedge fund; however, it is a different system, unrelated to government and nonprofit fund accounting.
Non-Profit organizations and government agencies have special requirements in their reporting and financial statements. Unlike for-profit entities that use one set of accounts (general ledger) non-profit agencies may have more than one general ledger or fund account depending on how many programs and services they are providing.
In non-profit accounting the basic purpose of fund accounting is to properly account for all resources received and used. Fund accounting classifies all resources into funds according to specific limitations placed on their use by the resource providers (grantor). Classification recognizes the stewardship and responsibility that is inherent in accepting restricted resources from funding sources.
Each fund has its own revenue, expense, transfer, assets, liabilities, and a fund balance. A change in fund balance represents the difference between fund additions (revenues and transfers in) and deductions (expenditures and transfers out). A fund balance is identified as the net difference between a fund’s assets and liabilities.
It is essential to keep accounting for different programs, services and/or funding sources segregated on your books, (financial statements).
The Grant Management Non-profit Fund Accounting book has plain and simple detailed information and illustrations on how to set up your accounting and document system to ensure the segregation of funds are setup properly. This book is perfect for established agencies, someone considering starting a charitable organization and absolutely essential for new organizations.
