View Full Version : Non-Profit Receipt &Tracking of Designated Funds
02-10-2008, 04:10 AM
We have received a donation designated to buy a new piano. How do we receive the donation as income and then keep the money in the general savings account, but at the same time, keep track of the liability that is "Due to Purchase of New Piano"? This also happens with other designated gifts for seperate things. Will this result in multiple Journal entries or can a single transaction be set up with multiple GL entries?
02-10-2008, 09:50 AM
You can't record it as income and as the liability at the same time. I'm not a non-profit guru, but as I understand it, restricted funds received are usually recorded as the liability. Then when the money is used, the income is recognized and the expense is hit.
So in accounting terms:
Recieve the money:
Debit cash, Credit liability
Use the money:
Debit liability, credit income
Debit expense (or fixed asset), credit cash
In peachtree, you would use receipts and payments for the money in and out, and a journal entry to reclass teh liability as income.
02-10-2008, 10:35 AM
As a non-profit the equity section of the Balance Sheet often has three accounts; unrestricted net assets, temporarily restricted net assets and permanently restricted net assets (these are endowment donations.)
You should have at least two income accounts; one for unrestricted donations and one for restricted donations.
Your entry would be to debit cash and credit restricted donations. My experience would be to create a job id for "piano" and code the specific donation to the specific job. If the funds are not spent when a financial report is made you would also debit unrestricted net assets and credit temporarily restricted net assets by the amount donated for the piano. When the piano is purchased you reverse this entry.
You are obligated to spend at least the amount donated on the purchase of a piano unless the donor changes the stated restriction.
You can co-mingle the restricted and unrestricted cash but you must always have cash balances that cover all restricted net asset amounts.
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