Definition
The accumulated fund, also known as the capital fund, is a reserve that non-profit organizations use to record surpluses and deficits. A surplus from income over expenditure is credited to the accumulated fund, whereas any deficit is debited from it. This fund is analogous to the capital of profit-making organizations and can be evaluated at any time by calculating the net assets, which are the total assets minus total liabilities of the organization.
Examples
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Club Surplus Entry: A civic club receives membership fees totaling $10,000 for the year, while incurring expenditure of $7,000. The $3,000 surplus is credited to the accumulated fund.
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Society Deficit Entry: A cultural society organizes an event that generates $5,000 in revenue but costs $6,500 to conduct. The $1,500 deficit is debited from the accumulated fund.
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End-of-Year Valuation: A non-profit environmental group has assets totaling $50,000 and liabilities of $10,000. The accumulated fund value thus is $40,000.
Frequently Asked Questions
Q1: Can accumulated funds be used for daily operational costs?
- A1: Yes, accumulated funds can be used for daily operational costs, but non-profits typically aim to maintain a healthy surplus to ensure sustainability and future projects.
Q2: How often should an accumulated fund be evaluated?
- A2: The frequency of evaluation depends on the organization’s policy, but it’s commonly evaluated annually during financial reporting.
Q3: Is an accumulated fund the same as a reserve fund?
- A3: Not exactly. While both are reserves, an accumulated fund includes all surpluses and deficits over time, while a reserve fund may be earmarked for specific purposes.
Q4: How do accumulated funds influence donor perception?
- A4: A healthy accumulated fund can boost donor confidence by demonstrating the organization’s financial stability and prudent financial management.
Related Terms
- Net Assets: The value of an organization’s total assets minus its total liabilities.
- Surplus: The amount by which income exceeds expenditure.
- Deficit: When expenditures exceed the income generated.
- Non-Profit Organization: An organization that operates for a communal or public benefit without profit distribution.
Online Resources
- Investopedia: Accumulated Fund
- Nonprofit Accounting Basics - National Council of Nonprofits.
- Financial Management - Nonprofit Accounting Basics.
Suggested Books for Further Studies
- “Financial and Accounting Guide for Not-for-Profit Organizations” by John H. McCarthy, CPA, Nancy E. Shelmon, CPA and John A. Mattie.
- “Not-for-Profit Accounting Made Easy” by Warren Ruppel.
- “Nonprofit Financial Management: A Practical Guide” by Charles K. Coe.
- “Financial Management for Public, Health, and Not-for-Profit Organizations” by Steven A. Finkler, Daniel L. Smith, and Thad D. Calabrese.
Accounting Basics: “Accumulated Fund” Fundamentals Quiz
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