Fund accounting is an accounting system that is used by nonprofits and other organizations to track their financial activities. This accounting method differentiates between unrestricted funds, which can be used for any purpose, and restricted funds, which can only be used for specific purposes. This system allows organizations to see where their funding is coming from and where it is going.
Organizations that use fund accounting typically have a board of directors or trustees who set financial policies and oversee the overall operation of the organization. The accounting staff works with the board to develop a budget and make sure that the organization’s funds are being used appropriately.
The fund accounting system can be complex, but it provides organizations with a great deal of transparency and accountability. This accounting method ensures that donors know how their money is being used and that the organization is using its funds in accordance with its mission.