Fund Accounting 101

There are two basic types of accounting packages on the market: fund and commercial. Commercial organizations, such as enterprises and businesses, have accounting systems that measure product, division, and company performance by gain and loss of profits.

Some small businesses have nothing more than a checkbook. Revenue is generated, and expenditures are paid. The same can be said for a church, but churches have social and legal responsibilities extending beyond the balance sheet.

The word “fund” is the key difference. Merriam-Webster dictionaries define “fund” as “a sum of money or other resources whose principal or interest is set apart for a specific objective.” In other words, a fund is something restricted for a particular purpose. In its simplest form, a fund accounting program automatically keeps these monies separate to help ensure their use for intended purposes.

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