FUND BALANCE Meaning and
Definition
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Fund balance is a financial term that refers to the difference between a government or organization's assets and liabilities. It represents the net worth or equity of the entity and indicates its financial stability and ability to meet financial obligations.
In governmental accounting, fund balance represents the residual interest in the entity's assets after deducting its liabilities. It includes the economic resources that are available for expenditure in the future, including those reserved for specific purposes. Fund balance is typically categorized into different classifications based on its restrictions or limitations on how it can be used. This includes non-spendable fund balance that includes assets that cannot be spent, such as inventory, prepayments, or long-term loans, restricted fund balance that is earmarked for specific purposes by external constraints or legal restrictions, committed fund balance that is set aside for specific purposes by an entity's highest level of decision-making authority, assigned fund balance which includes resources designated for specific use by lower-level authorities, and unassigned fund balance that represents the remaining portion that is not otherwise classified.
Fund balance plays a critical role in financial management as it serves as an indicator of an entity's financial health and capacity to fulfill its obligations. It provides a measure of financial flexibility and liquidity, enabling the organization to manage contingencies, invest in capital projects, or support ongoing operations. Monitoring and maintaining an adequate fund balance is essential for long-term sustainability and fiscal responsibility.
Common Misspellings for FUND BALANCE
- dund balance
- cund balance
- vund balance
- gund balance
- tund balance
- rund balance
- fynd balance
- fhnd balance
- fjnd balance
- find balance
- f8nd balance
- f7nd balance
- fubd balance
- fumd balance
- fujd balance
- fuhd balance
- funs balance
- funx balance
- func balance
- funf balance
Etymology of FUND BALANCE
The term "fund balance" is derived from two separate words: "fund" and "balance".
The word "fund" dates back to the late 17th century and comes from the French word "fond" meaning "bottom" or "base". It evolved to refer to a sum of money set aside for a specific purpose or activity.
The word "balance" has origins in Old French and Latin, with the Latin word "bilanx" meaning "having two scale pans". It refers to an equilibrium or equality between two sides or components.
When combined, "fund balance" refers to the remaining amount of money in a fund after all liabilities and appropriations have been accounted for. It represents the financial position or status of the fund at a given point in time.
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