Also known as a carry forward account, a carrying account is a special type of account that helps to identify and track changes in the carrying value or book value of certain types of assets, such as real estate. Typically, the amount found in these accounts are carried over from one period to the next. This is especially true with budget allocations that are associated with certain purposes, such as the acquisition of materials that are needed on an ongoing basis. In this scenario, the balance of the carrying account does not lapse at the end of a period, but carries over into the next period and can be used to make those authorized purchases.
One way to understand the function of a carrying account is to consider the annual budget for a museum. Within that budget, a specific amount is set aside to allow the museum to purchase items and materials related to the exhibits within the facility. If the appropriated funds are not exhausted at the end of the fiscal year, those remaining funds are accounted for in a carrying account, making it possible to add that amount to the upcoming fiscal year's allocation and use those funds to make authorized purchases in the new year. This is in contrast to a budget approach that would simply return the unused portion of the allocation to a general pool, redistributing the funds as operating surplus for the new year’s budget.
One of the benefits of a carrying account is the ability to continue making authorized purchases even if the total allotment is not exhausted by the end of a budget term. This can be especially helpful should some issue delay the approval of a new operating budget and the allocation of a new year’s worth of funds to the line item in question. Since the funds remaining in the previous year’s budget are slated to be carried forward anyway, they can reasonably be used for the designated purpose during this interim period.
The carrying account can be used with a number of applications that involve tracking the carrying value of different assets. This accounting approach helps with identifying and recording the depreciation or amortization associated with certain types of assets. A carrying account is also helpful with bonds in terms of staying abreast of the bonds payable and the issue costs associated with the bonds, as well as tracking the book value of real estate holdings from one period to the next.