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→General Concepts
In fund accounting, activities are grouped into various funds. There is always one '''unrestricted fund''' (which captures activity of monies not designated for a specific purpose) and (except for very small non-profits) at least one '''restricted fund''' (capturing activity of funds designated for a specific purpose).
In fund accounting, activities are grouped into various funds. There is always one '''unrestricted fund''' (which captures activity of monies not designated for a specific purpose) and (except for very small non-profits) at least one '''restricted fund''' (capturing activity of funds designated for a specific purpose).
A restricted fund may be established by another entity (such as a donor giving money to a church for its building fund) or by the entity itself to set aside funds for a specific purpose (such as a church setting aside funds for a youth mission trip).
A restricted fund may be established by another entity (such as a donor giving money to a church for its building fund) or by the entity itself to set aside funds for a specific purpose (such as a church setting aside funds for a youth mission trip). Governments may also do this (such as to transfer money from the general fund to a special fund, for example to contribute its share of total expenses to widen a state road through town).
Governmental entities and larger non-profits record transactions using [[modified accrual accounting]]; smaller groups (mainly churches) will use [[cash accounting]].
Governmental entities and larger non-profits record transactions using [[modified accrual accounting]]; smaller groups (mainly churches) will use [[cash accounting]].
A major difference in fund accounting between non-profits and governmental entities is the treatment of budgetary amounts: governmental entities will formally record budgetary estimated revenues and approved [[appropriation]]s, along with actual revenues, [[expenditure]]s, and [[encumbrance]]s in the accounting records, while non-profit entities will only record actual transactions.
Unlike with a company, where all activity is combined into one set of financial statements, in fund accounting the unrestricted fund (or '''general fund''') and each restricted fund is shown separately. (In practice, the front of the financial statements may have an executive summary showing the unrestricted fund, followed by all other funds consolidated, with detail by fund shown later.)
Unlike with a company, where all activity is combined into one set of financial statements, in fund accounting the unrestricted fund (or '''general fund''') and each restricted fund is shown separately. (In practice, the front of the financial statements may have an executive summary showing the unrestricted fund, followed by all other funds consolidated, with detail by fund shown later.)