Fund accounting is distinctive and is mostly used in non-profit organizations like churches. 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 will ensure that they can keep a clear record of all the sums of money that they receive and spend. To ensure proper management of fund, accounting needs to be prioritized. In the articles are the reasons why fund accounting is important.
To start with, it keeps a track record. Accounting is important in every field which that is why the non-profit requires require too. All the funds that they receive from various sources are managed in the best way. With the records, they can evaluate the expenditure and ensure that the people in charge are more responsible. 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. All the funds received and all the expenses are documented so as to ensure that there is accountability.
Secondly, it ensures accountability. They have different sources that fund them, and this means that accountability needs to be observed. Every spending needs to be for the right purpose, and the allocations need to be done in the right way. Since there are financial statements produced, then they need to ensure that they are accurate. So, with every disbursement to the several departments that they have, it will be recorded. All the accountants that are employed in these areas have the right qualifications, and this means that they have the capacity 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 non-profit organizations are free from tax, which is in all levels from local to state 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 honor various wishes that are made by the donor that donates the money to them. Maintaining the status and remaining compliant is a clear indication that they are responsible for all the fund use. That is why non-profit organizations need to ensure that they use fund accounting.grgra