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GAAP For Non-Profits › General Reporting Matters

Fund Accounting

Activities can be accounted for separately by setting up separate funds for the balances and transactions of those activities. A fund is a self-balancing set of accounts within the statements. The assets, liabilities, net assets, revenues and expenses relating to a given activity come together to form a separate fund - a set of financial statements within the statements. In reality, every organization has at least one fund, or one self balancing set of accounts, but where there is more than "one fund," we say the organization is using fund accounting. An organization may have any number or combination of general and restricted funds.

Fund accounting can perhaps best be understood through a look at the trial balance. Examine the 1999 trial balance for the SpringTime organization.

Trial Balance
December 31, 1999

Account debit credit
Bank - operating account 350  
Bank - capital account 150  
Contributions receivable 100  
Flower Pin Inventory 300  
Capital assets 2000  
Accumulated amortization   800
Accounts payable   100
Bank loan - current portion   130
Bank loan   500
Deferred capital contributions   400
Deferred contributions   200
Net assets   450
Flower Pin revenue   450
Flower Pin cost of sales 150  
Capital contributions recognized   50
Unrestricted contributions   100
Spring Fling revenue recognized   500
Administration costs 65  
Amortization 100  
Interest expense 65  
Spring Fling expenses 400  
  3680 3680

This organization currently only has one fund, a general fund. But you will notice that we can separate the capital activities from other activities. The capital activities are highlighted in yellow. We can now easily create two general funds for this organization, an operating fund and a capital fund, and present two self-balancing sets of accounts, see attached. In doing so, we have to split the opening net asset balance into opening fund balances for the operating and capital funds. Alternatively we can present one trial balance comprised of two funds, see attached.

Restricted Funds

Our above example is presented using the deferral method of accounting for contributions. Under the deferral method of accounting for contributions, an effort is made to match contributions with the related expenses. In the above example, capital contributions have been deferred, set aside as liabilities, until recognized as revenue. These contributions will be brought into revenue to offset the related amortization of the assets purchased with these contributions. As you can see only $60 of these contributions have been recognized in the current period, to match $60 of the amortization of the assets that were purchased with these contributions.

The CICA Handbook does not require the matching of contributions with expenses where the organization is following the restricted fund method of accounting for contributions. (4410.10) Under the restricted fund method, the organization can recognize the contributions immediately in a designated "restricted fund." On the attached page, we represent the capital fund trial balance as a restricted fund.

Required Disclosure for Fund Accounting

A description of the purpose of each fund reported is required. (4400.06)