Why might a not-for-profit health care organization use fund accounting?

Expert Solution

Nonprofit organization do not work for profit motive and hence accounting is done not for profitability but for accountability of the funds used in the business.

Every business should be well aware of its source of funds as well as allocation and use of that funds. Utilisation of funds can be known by proper accounting which will give in detailed report of what kind of funds organisation have received and whether the funds have been utilised for the purpose for which it has been received.

Simple example if you have fund of 15,000 in the account and you receive fresh funds of 10,000 to be utilised for renovation propose. Now with the use of proper fund accounting you can distinguish the source of fund , purpose of fund and accordingly utilise the fund for which it has been received.

Though fund accounting is a very confusing and tedious work but it is very helpful for organisation to keep a track of the funds infused in the organisation. Also with this you will be well aware of any unwanted expense or misutilisation of funds.

ekkarill92 answered 1 year ago

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