What is Fund Accounting?
Fund accounting is a system used by non-profit organisations, government entities, and endowments to track resources that are restricted to specific purposes. Each fund is a self-balancing set of accounts with its own assets, liabilities, and net assets.
How It Works
- Create separate funds for each restricted purpose — operating, capital, donor-restricted.
- Record every transaction inside the fund that owns the resource.
- Track inter-fund transfers as transparent line items.
- Produce fund-level financial statements as well as consolidated reports.
- Reconcile each fund to its source documents and donor agreements.
Saudi Context
Saudi non-profit associations licensed by the Ministry of Human Resources and Social Development must maintain fund-style records to satisfy donor reporting and government inspections. Endowments (awqaf) supervised by the General Authority of Awqaf also rely on fund accounting principles.
Example
A charity receives SAR 500,000 restricted to building a school. The amount sits in a dedicated capital fund. When SAR 200,000 is spent on construction, the fund decreases and a fixed asset of SAR 200,000 is recognised inside the same fund.