Community Forex Questions
What are the main types of fund balances?
Fund balances are divided into categories that show how much freedom an organisation has when using its resources. These categories help clarify whether funds are completely flexible or tied to specific purposes. They also make financial reporting clearer and more transparent, especially for governments and nonprofits.
Unassigned fund balance is the most flexible category. It represents resources that are not restricted or committed, so they can be used for general operations or unexpected needs. This category typically appears only in the general fund.
Assigned fund balance includes amounts set aside for a specific use, but not through formal governing action. A finance officer or committee might assign funds for upcoming projects, planned purchases, or next year’s budget support.
Committed fund balance involves resources reserved for a purpose through a formal vote or resolution by the governing body. Because the commitment must be made before the end of the fiscal year, it carries more weight than an assignment and requires another formal action to remove.
The restricted fund balance is the most limited category. These funds must be used only for purposes set by external rules, such as laws, grant agreements, or donor requirements. Organisations cannot change how these funds are used.
Nonspendable fund balance represents items that cannot be converted into cash, such as inventories or prepaid expenses. While still part of the total fund balance, these amounts aren’t available for spending.
Together, these categories help organisations manage resources responsibly and keep financial decisions aligned with policy and legal expectations.
Unassigned fund balance is the most flexible category. It represents resources that are not restricted or committed, so they can be used for general operations or unexpected needs. This category typically appears only in the general fund.
Assigned fund balance includes amounts set aside for a specific use, but not through formal governing action. A finance officer or committee might assign funds for upcoming projects, planned purchases, or next year’s budget support.
Committed fund balance involves resources reserved for a purpose through a formal vote or resolution by the governing body. Because the commitment must be made before the end of the fiscal year, it carries more weight than an assignment and requires another formal action to remove.
The restricted fund balance is the most limited category. These funds must be used only for purposes set by external rules, such as laws, grant agreements, or donor requirements. Organisations cannot change how these funds are used.
Nonspendable fund balance represents items that cannot be converted into cash, such as inventories or prepaid expenses. While still part of the total fund balance, these amounts aren’t available for spending.
Together, these categories help organisations manage resources responsibly and keep financial decisions aligned with policy and legal expectations.
Fund balances represent the financial position of a fund and show how much money is available for use. The main types are nonspendable, restricted, committed, assigned, and unassigned fund balances. Nonspendable balances cannot be spent, such as inventory or prepaid expenses. Restricted balances are limited by external rules like laws, grants, or donor requirements. Committed balances are set aside by formal decisions of governing authorities for specific purposes. Assigned balances are intended for particular uses but are less formally designated and more flexible. Unassigned balances are available for general use and provide financial flexibility to cover unexpected costs. Understanding these fund balance types helps organisations manage resources responsibly, maintain transparency, and ensure funds are used according to legal and operational priorities.
Dec 11, 2025 02:54