ABSTRACT
This chapter makes to understand the use of funds in governments and to understand key elements in fund-level statements and to use the information in fund-level statements in financial analyses. Financial operations of different activities have different goals and require different strategies and practices. Fund accounting and reporting has a unique advantage. The chapter discusses the key components of fund-level financial statements and how to use them in financial analysis. Two conditions must be met to construct a fund. First, a fund is a fiscal entity in which assets are set aside for liabilities incurred in supporting specific activities of the fund. A fund reports its own assets, liabilities, and the fund balance, which is the difference between assets and liabilities. Second, a fund is an accounting entity in which the double-entry mechanism must be used in recording transactions. The accounting equation for a fund can be expressed as: Assets = Liabilities + Fund Balance.
