Fund accounting has its unique characteristics since it is used in non-profit organizations. This shows that accounting is handled in a different way since their source of funds is from contributions. Non-profit organizations include the churches, and hence there is a need that the accounting is done in a proper way. In this way, they are able to keep a record of their expenditures hence liability. Accounting is important both in business and other areas. Below are the various benefits of fund accounting in non-profit organizations.
First, it keeps a track record. Accounting in these fields is also important because it helps ensure that the funds are handled in the best way. This way, they will be able to manage all the cash they have received in the best way. With the records, they can evaluate the expenditure and ensure that the people in charge are more responsible. When there is no track record, the funds may be misused, and to avoid this, the non-profit organizations need fund accounting. Therefore, every expenditure is recorded, and this helps ensure that the ones in charge are more responsible when handling the cash.
It also ensures that there is accountability. For these types of organizations, they get their funds from different sources, and therefore all this needs to be managed in a proper way. The funds need to be allocated in the right areas and ensure that every bit of spending is 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. The accountants in these areas have received the best training and therefore they have the knowledge required to manage these accounts. For any form of negligence on their side, they are legally responsible, and this guarantees that the funds are in the right hands.
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 remain with this status, they need to ensure that they are compliant with the set rules. This can be achieved by ensuring that they keep track records of their funds and ensuring that they are accountable. They are able to honor the wishes of the donors that give them these funds. 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