Fund accounting is a different type of accounting that is mostly 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. This is a way to keep a good track record of how the sums of money are used, and they can also use it for reference. To ensure proper management of fund, accounting needs to be prioritized. Below are the various benefits of fund accounting in non-profit organizations.
First, it keeps a track record. Accounting is important in every field which that is why the non-profit requires require too. This way, they will be able to manage all the cash they have received in the best way. A record shows the cash flow, which makes the people in charge more responsible since they need to indicate how the money was spent. When there is no track record, the funds may be misused, and to avoid this, the non-profit organizations need fund accounting. Therefore, every expenditure is recorded, and this helps ensure that the ones in charge are more responsible when handling the cash.
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. They need to ensure that there is the proper allocation of the funds and ensure that the cash is spent in the right way. The financial statements will reflect all this, and that is why they need to be careful and 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. In case there is any form of negligence on their side, they will be held responsible, and this shows that the funds are managed properly.
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 is by ensuring that they are accountable for every spending and keeping a clear track record of their funds use. This honor various wishes that are made by the donor that donates the money to them. If they are able to maintain all this, then this shows that the funds are used in a good way, which is expected from their side. That is why non-profit organizations need to ensure that they use fund accounting.grgra