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Accounting Concepts [The Accounting Equation-Fund Balance (Net Worth)]
Posted by Saleem Mukati| Assets Cash Accounts Receivable Inventory | LESS | Liabilities Accounts Payable Deferred Revenue | EQUALS | Fund Balance Beginning Fund Balance Revenues Expenses Fund Additions Fund Deductions |
| Fund Balance | Also known as Net Worth, Retained Earnings or Net Assets, is the difference between what you own (Assets) and what you owe (Liabilities). In other words, if you took everything that you own and turned it to cash and paid off all your debts (liabilities) whatever you had leftover would be your net worth, fund balance or net assets. Fund Balance at the University is increased and decreased by Revenues, Expenses, Fund Additions and Fund Deductions. Revenues and Fund Additions increase Fund Balance. Expenses and Fund Deductions decrease Fund Balance. Intuitively this should make sense. If you make or get money (increase revenue or fund additions), you are worth more. If you spend or lose money (increase expenses or fund deductions), you are worth less.
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| Revenues | Money earned for goods or services provided. And at the University unearned money, such as, unrestricted gifts, are also recorded as revenue. | ||||||||||||||||||||
| Expenses | Money spent for things that benefit or help the university operate, for example, salaries, wages, E.R.E., operational supplies, travel, capital and student support. | ||||||||||||||||||||
| Fund Additions | Money received by the University that is not earned, for example, grants and contract money and restricted gifts. | ||||||||||||||||||||
| Fund Deductions | Money paid by the University that is not considered an expense. For example, excess grant money or deposits held for another entity |
1 comments:
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Accounting For Business
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