Treatment of Specific Funds

Where members contribute, or an organization sets aside, money for a stated purpose — a Prize Fund for annual prizes, a Match Fund for a sports team's tournament expenses, a Building Fund for construction — that money and any income earned on it must be kept separate from the general Capital Fund and used only for the stated purpose.

Accounting treatment

• The fund is shown as a liability in the Balance Sheet at its balance at the end of the year.
• Any donation or subscription received specifically for the fund, and any interest or dividend earned on investments of the fund, is added to the fund — never credited to the Income and Expenditure Account.
• Any expense incurred for the specific purpose during the year is deducted from the fund, not shown as an expense in the Income and Expenditure Account.
• If, at the end of the year, the expense incurred for that purpose exceeds the fund available (opening balance plus additions), only the excess is transferred to (debited in) the Income and Expenditure Account as a loss; if the fund exceeds the expense, the closing balance of the fund is carried forward as a liability in the Balance Sheet.

A quick way to verify the closing balance of a specific fund is to prepare it as a small ledger account: