'FACHE Practice Exam 2025 – All-in-One Study Guide to Master Your Healthcare Executive Certification!'

The primary purpose of fund accounting in healthcare is to establish separate entities for specific activities. Fund accounting is a method used to ensure that resources are properly allocated and managed according to various regulations and restrictions. In a healthcare setting, this is particularly important because different funds may be designated for specific purposes, such as patient care, research, or capital improvements.

By establishing separate entities, healthcare organizations can effectively manage their finances, ensuring that funds designated for a particular purpose are used specifically for that purpose. This separation can help improve accountability, transparency, and efficiency in the organization’s financial management. It allows for better tracking of resource utilization, compliance with funding agreements, and effective reporting to stakeholders.

In contrast, while tracking individual patient accounts, consolidating financial activities, and auditing performance are important aspects of financial management in healthcare, they do not encapsulate the unique function of fund accounting, which centers on the allocation and use of resources for designated activities.