Fund accounting has its unique characteristics since it is used in non-profit organizations. This means that the regulations are quite different since most of these organizations’ source of revenue comes from donations. Non-profit organizations include the churches, and hence there is a need that the accounting is done in a proper way. In this way, they are able to keep a record of their expenditures hence liability. Accounting is important both in business and other areas. In the articles are the reasons why fund accounting is important.
Initially, it keeps a track record. Accounting in these fields is also important because it helps ensure that the funds are handled in the best way. All the funds that they receive from various sources are managed in the best way. With the records, they can evaluate the expenditure and ensure that the people in charge are more responsible. In a case there is no record, then the money may be used in the wrong ways, and that is why this is very important. All the funds received and all the expenses are documented so as to ensure that there is accountability.
Secondly, it ensures accountability. For these types of organizations, they get their funds from different sources, and therefore all this needs to be managed in a proper way. Every spending needs to be for the right purpose, and the allocations need to be done in the right way. Financial statements show every bit of fund use, and therefore they need to ensure that they are accurate.
So, with every disbursement to the several departments that they have, it will be recorded. The accountants in charge of these funds are well qualified and have the necessary training required to handle these accounts. Any negligence on their part will be held legally responsible, which shows that they have integrity.
Lastly, they have tax-exempt status. The funds that the non-profit organizations receive are free from tax from state to a local level. To remain with this status, they need to ensure that they are compliant with the set rules. This can be achieved by ensuring that they keep track records of their funds and ensuring that they are accountable. This honor various wishes that are made by the donor that donates the money to them. By remaining compliant, this shows that they are responsible for all the cash they receive and use it for the right purposes. These are the various benefits of fund accounting. grgra