What is the concept of fund accounting primarily focused on?

The concept of fund accounting is primarily focused on emphasizing accountability rather than profitability. Fund accounting is used predominantly by governmental and nonprofit organizations to ensure that resources are being used in accordance with specified purposes and legal restrictions. In this framework, funds are segregated into various categories based on the sources of funding and their intended use, allowing organizations to track expenditures against budgets and ensure compliance with regulations.

This approach enables these entities to demonstrate how money is spent, showing transparency and accountability to stakeholders such as taxpayers, donors, and grantors, rather than prioritizing profit-making, which is typical in for-profit entities. Fund accounting is designed to provide clear information regarding the management of funds, ensuring that resources are utilized efficiently and effectively for public good or charitable purposes.