Glossary
Fund Accounting

Fund

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

A fund is a separate accounting entity used to track resources and activities for a specific purpose or restriction within a nonprofit.
A fund in nonprofit accounting is a self-balancing set of accounts used to track resources and activities for a specific purpose, project, or donor restriction. Each fund operates independently, with its own assets, liabilities, revenues, and expenses, making it easier to demonstrate accountability and compliance with restrictions. Nonprofits often have multiple funds—such as general, restricted, endowment, or grant-specific funds—to ensure that resources are used appropriately and transparently. Fund accounting allows organizations to manage and report on these separate pools of money, which is essential for stewardship and regulatory requirements.

Key Takeaways

  • Funds are independent sets of accounts within an organization.
  • They help track restricted and unrestricted resources separately.
  • Essential for demonstrating accountability to donors and regulators.

Why It Matters

Funds ensure nonprofits track and use resources as intended by donors or grants.

Real World Example

A nonprofit animal shelter receives a $50,000 grant to build a new dog kennel. To ensure the money is only used for that purpose, they create a 'Kennel Fund' in their accounting system. All grant income, expenses for construction, and related transactions are tracked in this fund. This way, the shelter can provide detailed reports to the grantor showing exactly how the money was used, ensuring transparency and compliance. Meanwhile, the shelter’s daily operations, like food and veterinary care, are tracked in separate funds, maintaining clear boundaries between restricted and general funds.

How Aplos Helps

Aplos makes it easy to create, manage, and report on multiple funds. With Aplos, organizations can allocate income and expenses to specific funds, generate fund-specific reports, and maintain transparency for donors and auditors. This simplifies compliance and demonstrates responsible stewardship of restricted and unrestricted resources.
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Frequently Asked Questions

What is a fund in nonprofit accounting?

A fund is a separate accounting entity that tracks resources for a specific purpose or restriction within a nonprofit organization.

Why do nonprofits use multiple funds?

Nonprofits use multiple funds to track different sources of revenue and expenses, ensuring compliance with donor or grant restrictions.

How does Aplos help with fund management?

Aplos enables users to manage, allocate, and report on multiple funds, maintaining transparency and simplifying compliance.

What types of funds might a nonprofit have?

Common types include general funds, restricted funds, endowment funds, and grant-specific funds.

Can funds be combined in reports?

Yes, many accounting systems like Aplos allow for consolidated or fund-specific reporting based on organizational needs.

Related Terms

Offerings
Risk Assessment
Class Tracking
Cost Center
Audit Committee
State Withholding

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