Fund accounting is a different type of accounting that is mostly used in non-profit organizations. This shows that accounting is handled in a different way since their source of funds is from contributions. Churches are non-profit organizations, and to ensure there is a proper use of funds, they need to do fund accounting. In this way, they are able to keep a record of their expenditures hence liability. To ensure proper management of fund, accounting needs to be prioritized. Discussed in the article are why fund accounting is important in these types of organizations.
First, 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. This ensures that the funds received are managed, and there are no embezzlement cases. The record is very important since it indicates how the money was used and with this, the people in charge are more responsible in management. 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. The organizations, therefore, will be able to manage their cash in the best way since they need to be accountable.
The second point is it ensures accountability. They have different sources that fund them, and this means that accountability needs to be observed. The funds need to be allocated in the right areas and ensure that every bit of spending is in the right way. Since there are financial statements produced, then they need to ensure that they are accurate. All the disbursements done are well recorded to show where the money how the money was spent. The accountants in these areas have received the best training and therefore they have the knowledge required to manage these accounts. Any negligence on their part will be held legally responsible, which shows that they have integrity.
Ultimately, they have a tax-exempt status. The funds that the non-profit organizations receive are free from tax from state to a local level. To ensure that they maintain this status, they need to ensure that they remain compliant. They can only do this by ensuring that they are accountable and are able to track all the funds use and allocation. This is to ensure that they honor the various donors that have given them these funds. 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