An accounting system organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance or net assets, revenues and expenditures or expenses, as appropriate.

Resources are allocated to and accounted for in individual funds based upon purposes for which they are to be spent and the means by which spending activities are controlled. Fund accounting is used by state and local governments and by not-for-profit organizations that need to account for resources, the use of which is restricted by donors or grantors