Which statement about fund balance is true?

• A. Cash on hand equals fund balance.
• B. Fund balance is the residual of assets minus liabilities in a fund, unrestricted or restricted.
• C. Fund balance is always a liability.
• D. Fund balance is the sum of restricted assets only.

Answer: (B)

Fund balance is the net resources available in a fund, calculated as assets minus liabilities. It represents what is left after all obligations are covered, and it can be unrestricted (free for the fund’s use) or restricted (limited by external or internal requirements). It is not equal to cash on hand, which is just one asset, and it is not a liability. It also isn’t only the sum of restricted assets, since restricted assets are part of the overall assets that contribute to the fund balance along with unrestricted assets. For example, if a fund has 10 million in assets and 2 million in liabilities, the fund balance is 8 million; part of that balance may be restricted, part unrestricted, but the total balance is the combination of both.