At present, no balance sheet is prepared to show the financial condition of the Federal Government as a whole or of any of its agencies other than those operating business-type enterprises. There are many reasons for the lack of balance sheets but the two principal ones are (1) the use of the cash basis of accounting and (2) the failure to recognize fund distinctions. The purpose of this article is to outline briefly a system of fund accounting for the Federal Government. Such a system will make possible the preparation of fund statements that will reflect the true financial condition and operations of the Government. Although the system will enable the preparation of both fund balance sheets and fund operating statements, this article is limited to balance sheets. The Federal Government should establish three types of funds: (1) a General Fund to be used to account for all assets or other resources owned by the Government, (2) Trust Funds to be used to account for assets held by the Government in the capacity of agent or trustee for others; and (3) Business-Type Funds to be used to account for the transactions of business-type enterprises.