Fund Accounting Overview

Non profit organizations in general, often use a form of accounting different from that used by for-profit corporations. Non profit organizations typically practice fund accounting, whereas corporations practice corporate accounting.

Regulations or other restrictions may require a municipal utility to account for the finances of each of its departments as a separate entity.

A fund is an accounting entity with its own self-balancing set of accounts. Each fund has its own "sub general ledger" with its own chart of accounts, and within each fund, its debits equal its credits at all times. This allows the utility to report on the financial state of each fund independently.

In addition to having a fund for each department, there is also a general fund, which is used to handle inter-fund transfers as well as shared accounts.

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Parent Topic: Fund Accounting