Accounting for Liabilities and Fund Balance
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Liabilities refer to IU's financial obligations. Three criteria need to be met to classify a transaction as a liability i.e. presents the university with an obligation, the obligation is a result of past events and settling of the obligation will require an outflow of valuable resources. In addition, this section will discuss all auto-entries posted for liability transactions. The focus here is on the liabilities section of the balance sheet which is made up of:
Fund balance (Equity) is essentially the difference between assets and liabilities. In general, it is the balance remaining after the assets have been used to satisfy the outstanding liabilities. Very little activity occurs directly within the fund balance (equity) accounts and is comprised of the prior existing fund balance (equity) and the period’s net income. For further information on the fund balance (equity), refer to the balance sheet standard in the financial statements tile.
Note: At IU, equity is the equivalent of fund balance