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This guide or lesson will focus attention on fund accounting in public sector and answer questions like what is he meaning of fund accounting, what is a fund, what is fund accounting etc. so pay attention to the answers that follows.


Fund Accounting in public sector accounting, a fund may be defined as an independent accounting entity and must be accounted for using a separately identifiable set of accounts in such a way that it is possible to identify the specific asset and liabilities that represent the balance on the fund


A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts for recording assets, liabilities and residual equities and changes which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

It is a sum of money aggregated from a specified source for a government unit for obtaining a specific objective in accordance with certain regulations.

Since the fund is a separated entity, it should be accounted for using a separate identifiable set of account in such a manner that makes it possible to specifically identify the assets and liabilities of the fund.


Fund accounting, therefore, is a method of recording financial information that groups resources in a fund based on their source and the use of those resources.

Fund accounting reports in terms of the fund rather than in terms of organisation. in a fund accounting system, sums of money which are intended for the specific objective are aggregated into different accounting unit. each fund represents a separated accounting entity.

Each fund may have

  • transactions within itself.
  • Transactions with external parties
  • Transactions with other funds of the same organization.

Recommended to read before Expenditure-public sector accounting in Ghana

The purpose of fund accounting is to demonstrate fiduciary stewardship, that is, to show that resources have been handled in a proper way, honestly within proper procedures, the budget, and, the consolidated fund.

The structure of a fund and the accounting system designed to assist in reaching the fund’s objectives depends on the policies and programs, requirements of its implementation, monitoring and evaluation. Programme classification and appropriation structures also depend on the fund’s objectives.

The financial Administration Regulations, 2004 and various enactments establishing the funds provide the rules of accounting and responsibilities of stewards who operate the funds

In the public sector, diversity of functions and restrictions on how certain resources may be used makes it necessary to focus attention on individual areas of operation and to segregate resource provided for a specific purpose. Central and local government both use the fund system of accounting, rather than the entities system fund in the private sector.

The organization is seen as a series of funds or as a series of reporting units, Financial reporting for the organization is an aggregation or consolidation of the individual reports of the constituent ‘funds’.

There is some flexibility in defining the reporting units buts the major funds are subject to an explicit framework of controls. Individual funds operate within a complex pattern of:

  1. statue law
  2. Statutory instrument and government
  3. Case law
  4. Custom or convention.

These cover the sources of capital and revenue, financial and the purposes for which they may be spent.

Resources of central and local governments cannot be treated as an unrestricted total.

A fund is a sub-division of the fiscal activities, assets, liabilities, revenues and expenditure of the organization, related to the conduct of a specific function or activity or the attainment of a specific objective. Thus, a fund is a separated accounting entity, operating within a framework of specific controls, with a self-balancing set of accounts.

In practice accounts of funds are kept separately, so for each fund, and operating statement (revenue account) and balance sheets may be produced, and completely separate sets of books are not kept. Cash is usually the balancing entry, so if the cash on each fund is aggregated it should produce the total cash book balance.

A fund is an independent accounting entity and must be accounted for using a separately identified set of accounts in such a way that it is possible to identify the specific assets and liabilities that represent the balance on the fund.

Each fund may have

  1. Transactions within itself
  2. Transactions with external parties
  3. Transactions with other funds of the same organization
  4. Each fund must apply full double entry to record the transactions

Most funds are controlled by annual budget (annual estimates) and all require at least annual balancing and reporting. For each fund, a revenue account and balance sheet may be produced, buy in many cases the balance sheet is not published.

The main aim of fund accounting is to demonstrate fiduciary stewardship, ie to show that resource has been dealt with in a proper way. This involves ensuring that:

  1. The fund is applied honestly and comply with proper procedures
  2. The fund is spent on properly approved activities and within budgeted level;
  3. Transactions are within legal powers.


Public Funds

FAR 5.

  1. in accordance with article 175 of the constitution, the public funds of Ghana consist of the consolidated fund, contingency fund and such other funds as may be established by or under an Act of parliament.
  2. Except as otherwise provided in this Act, any fund other than the consolidated fund shall be governed by the enactment establishing the fund.



FAR 6.

  1. In accordance with article 176 of the constitution, there shall be paid into the consolidated fund.
  • Revenue or other money raised or received in trust for or on behalf of the Government. And
  • Any other monies raised or received in trust for or on behalf of the Government
  1. The revenue and other monies referred to in subsection (1) exclude revenue or other monies

(a). payable by, or under an Act of parliament into some other fund established for a specific purpose or

That may, under an Act of parliament, be retained by the department or agency of government that received them for the purpose of defraying the expenses of that department or age.

  1. (3) where under sub-section (2) provision is made in any enactment of ran agency of Government to retain its internally generated funds for the purpose of defraying its expenses pursuant to article 176 (2)(b) of the constitution, the agency shall make full disclosure of internally generated funds to the minister at the end of every month.

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Eric Adjei

Eric Adjei

A professional with six (8) years’ experience in finance and accounting. Demonstrating expertise in accounting procedures, computerized accounting system management and financial operations. Financially astute with excellent analytical, problem solving, management, people supervision, organizational, business administration, operation and commercial management and teaching skills.

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