Fund accounting is a system emphasizing accountability rather than profitability. Non-profit organizations and governments often use this system. Here, the fund is a self-balancing set of accounts, segregated for specific purposes in accordance with laws and regulations and set with limitations.
Fund accounting is often linked with investment accounting, portfolio accounting or securities accounting. Synonymously, these accounting strategies describe the process of accounting for a portfolio of investments such as securities, commodities in an investment fund such as a mutual fund.
It focuses on documenting the flow of funds in and out of the organization, rather than on how much profit an organization makes. Instead of revenue and expenses, fund accounting focuses more on the statement of profit and loss.
In line with non-profit organization, it is not required to break even or to lose money, but only to retain any excess funds and not to distribute them to members or shareholders as the profit for business. Large net assets insure that the non-profit organization will be able to continue to serve its purpose consistently whatever the circumstances may be
To increase an asset account, you can debit the account, in the same way that to decrease an asset account you credit the account. Any transaction is always a combination of one or more debits and credits. The sum of debits always equals the sum of credits for any transaction.
Accountability Linked with a Fund Accountant
A fund accountant works for a hedge, mutual or pension fund group in various accounting aspects; support monthly activities with funds, and prepare accurate financial statements in accordance with accounting principles and statutory to guidelines in line with funds. A fund accountant also assists in tax reporting processes.
A fund accounting specialist works with finance, tax and internal auditors to ensure that the organization’s financial statements are efficient and that such statements adhere to generally accepted accounting principles and regulatory guidelines. Ensuring that internal controls of financial reporting processes and mechanisms are adequate and operating effectively and the mechanisms must agree with corporate policies and industry standards as well.
The fund accountant plays a vital role to ensure the effectiveness of the fund accounting strategies implemented on your institution.