In Aplos, which is a fund accounting software, understanding the distinction between funds and tags is crucial for proper financial management and accurate reporting. While both are used to track income and expenses, they serve different, distinct purposes and impact your financial reports differently.

Funds: The Core of Your Financials

Funds are the foundation of Aplos. They are equivalent to equity accounts like "retained earnings" or "net assets" in traditional accounting software like QuickBooks. Think of them as permanent "buckets" or pools of money.

• Purpose: Funds are used to track your organization’s unrestricted money (general fund) and restricted money, which is set aside for a specific purpose either by an internal decision (e.g., a building improvement fund) or an external requirement (e.g., a grant fund).
• Permanence: Since they represent equity, funds are permanent accounts. Once created and used in a transaction, they cannot be deleted or disabled.
• Reporting: Each fund acts as a self-balancing set of accounts. You can pull an income statement (P&L) for a specific fund to see its income and expenses, but most importantly, funds appear on your balance sheet. A fund's balance is a component of your assets and liabilities, meaning a fund can have money spread across multiple asset and liability accounts.

Tags: A Flexible Tracking Tool

Tags are a separate tracking tool designed to provide additional layers of detail to your financial data.⁴ They are similar to "classes" in QuickBooks.

• Purpose: Tags are used to track specific, often temporary, programs, events, or locations. For instance, you could create a tag for a "Winter Gala" to track all income and expenses related to that specific event.
• Permanence: Tags are not permanent accounts and do not represent equity. You can create and manage them with much greater flexibility.
• Reporting: You can run an income statement (P&L) report for a tag to see if a specific initiative was profitable or not. However, tags will never appear on your balance sheet. They only track income and expense activity.

How They Work Together in Data Entry

Every transaction you enter in Aplos requires a fund. This is mandatory because all financial activity must be tied to an equity account.

Tags are optional. You only need to apply a tag to a transaction when it's relevant. For example, when purchasing tablecloths for a fundraising event, you would code the transaction to an expense account and a fund (e.g., your general fund). You would then apply the specific tag for that event (e.g., "Winter Gala") to track that expense.

In essence, both funds and tags track income and expenses and allow you to pull P&L reports. The key difference is that funds represent equity and appear on your balance sheet, while tags are simply a tool to track income and expense details, providing deeper insight into specific projects without affecting your balance sheet.