Lesson 71 - Advanced Accounting Course

Lesson 71: Fund Accounting: Differences from Corporate Accounting

💡 What is Fund Accounting?

Fund accounting is a method of accounting used by non-profit organizations, governments, and public sector entities to track how money is used, rather than how much profit is made.

🧠 In simple terms: Fund accounting focuses on accountability, not profitability.

🏢 Fund Accounting vs. Corporate Accounting

📂 What is a “Fund”?

A fund is like a mini-accounting system inside the organization. Each fund has:

• 💰 Its own budget
  
  

• 📑 Its own financial statements
  
  

• 🎯 A specific purpose or restriction (e.g., scholarships, building projects, donations)
  
  

🎯 Example

A university might have:

• General Fund – for everyday operations
  
  

• Scholarship Fund – only for giving scholarships
  
  

• Research Grant Fund – must be used for research projects only
  
  

Each one is tracked separately to ensure funds are used only for their intended purpose.

🔢 Key Features of Fund Accounting

🧾 Financial Statements in Fund Accounting

Fund-based organizations typically prepare:

1. Statement of Financial Position by Fund 🧮
   
   

2. Statement of Activities (like an income statement)
   
   

3. Statement of Cash Flows by Fund
   
   

4. Schedule of Functional Expenses (for nonprofits)
   
   

📊 Comparison Table

✅ Summary

• Fund accounting is essential for nonprofits and public entities to ensure money is used properly
  
  

• It’s about tracking accountability, not making a profit
  
  

• Each fund is managed like a separate mini-entity
  
  

• It differs from corporate accounting in purpose, structure, and focus