What is fund accounting?

Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by nonprofit organizations and by governments.

Who uses fund accounting?

Fund accounting is generally used by any organization that focuses on accountability rather than profitability. This includes nonprofit organizations, government entities, churches, and associations. These 501 (C) (3) organizations are the primary type of organization discussed in matters of fund accounting.

How do you visualize accounts for fund accounting?

The best way to visualize accounts for fund accounting is to think of them as a dresser. The account is the whole dresser, and each fund has a drawer in that dresser. The drawers are different sizes and shapes; each represents the portion of the dresser that the fund owns. Fundamental principles of fund accounting: