Question

M10:

Discuss the characteristics of fund accounting. Explain how fund accounting is different from managerial accounting.

200 words or more

Answer 1

Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organisations or by law. It emphasizes accountability rather than profitability, and is used by Nonprofit organizations and by governments.

characteristics of fund accounting

• BUILT FOR NON PROFIT ORGANIZATIONS:Designed from the ground up for the reporting cpartner is dedicated to complexeties of non profits.
• MULTI DIMENSIONAL CHART OF ACCOUNTS:Allows non profit to adapt to each funding source or for a particular kind of grant
• INSTANT TRANSPARENCY FOR STAKEHOLDERS:Easily generate reports for a single funding source or for a particular kind of grant
• INTERCONNECTS TO MISSION CRITICAL SYSTEMS:Works with grant management,fund raising,hr software and more.
• SUPPORT FROM KNOWLEDGEABLE CONSULTANTS:Know that your technology partner is dedicated to non profits and only works with non profits.

FUND ACCOUNTING:

Fund accounting is a system of accounting used by non-profit entities to tracking the amount of cash assigned to different purposes and the usage of that cash. The intent of fund accounting is not to track whether an entity has generated a profit, since this is not the purpose of a non-profit. Thus, the focus of fund accounting is on accountability, rather than profitability. A non-profit may use a number of funds, each of which is set up with a separate set of accounts and a balance sheet, so that users can determine the extent to which cash has been used for its intended purpose. Funds are intended to restrict the uses to which certain cash flows can be used.

A separate budget may be established for each fund. By doing so, the manager of a non-profit can track the amount of expenditures against the level of available funding and manage the expenditure level so that the services provided via a fund are made throughout the budget year without triggering a deficit in the amount of available funds.

MANAGERIAL ACCOUNTING:

Managerial accounting, also known as cost accounting, is the process of identifying, measuring, analyzing, interpreting, and communicating information to managers for the pursuit of an organization's goals. managerial accounting information is aimed at helping managers within the organization make decisions . Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization's strategy . Management accountants are seen as the "value-creators" among the accountants. They are more concerned with forward-looking and taking decisions that will affect the future of the organization . In management accounting , managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions. Management accountants look at the events that happen in and around a business while considering the needs of the business. From this, data and estimates emerge.

THUS THE MAIN FOCUS FOR MANAGERIAL ACCOUNTING IS DECISION MAKING WHILE FOR FUND ACCOUNTING IS TO DO ACCOUNTING FOR NON PROFIT ORGANIZATIONS.MANAGERIAL ACCOUNTING IS USEFUL BOTH FOR PROFIT AND NON PROFIT ORGANIZATIONS UNLIKE FUND ACCOUNTING.MANAGERIAL ACCOUNTING FOCUS ON PROFIT MAXIMIZATION WHILE FUND ACCOUNTING FOCUSES ON ACCOUNTABILITY RATHER THAN PROFITABILITY.