separate fund vs. restricted account

[maviszook]

I'm trying to understand when it is correct to create a new fund. I understand that I should do that when I want to have a self-balancing unit. However, aren't temporarily restricted accounts doing the same thing?

The need in question is "capital maintenance reserve", like a building fund (?) but for some several future major maintenance overhaul projects. For instance, if the "fund" didn't have enough money, our general operating fund would surely kick in and try to cover it, and not expect to be paid back.

And by the way, what is this I'm reading now about sub-accounts balances going to zero at the year end? Aren't these usuallly used for tracking donor restrictions?

[Matt]

Generally you create a new accounting fund for an activity that needs a separate set of financial reports (Income and Expense Statements and Balance Sheets). Examples of activities that need separate accounting funds are General Funds, Missions Funds, Building Funds, and Church School funds. If money is designated for a specific purpose generally you want to set up restricted accounts in the accounting fund that the designation logically belongs to.

The balances in the income and expense sub accounts will zero out at the end of your fiscal year, just like the other income and expense accounts. If these are being used to track donor restrictions you will want to make sure that both the income and expense sub accounts are set to close into the same equity account. That way if there's any excess of income vs. expenses for the year the balance will carry forward in the equity account to the next year.