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our non profit is starting a capital campaign. We recieved a restricted gift for this campaign. Should this appear on the P&L as restricted income? does there need to be a offsetting entry in the expenses?

Answers

Jonathan Sizemore
Title: Asst. Dir. Bus./Fin. Admin.
Company: Calvary Baptist Church
(Asst. Dir. Bus./Fin. Admin., Calvary Baptist Church) |

The first entry is a debit to cash and a credit to revenue. The revenue should be classified as temporarily restricted or permanently restricted. Usually it is temporarily restricted. An example of permanently restricted would be an endowment, where you can't spend the principal but only the interest.

When it's time to use the money, it can be capitalized (debit asset and credit cash), or expended (debit expenditure and credit cash) as appropriate. If expended, it should be classified as general and administrative, or program, with subcategories as needed.

Note that Net Assets (i.e. equity) on the Statement of Financial Position (i.e. Balance Sheet) must be categorized to show how much is unrestricted, temporarily restricted, and permanently restricted.

Jill Nickerson
Title: CFO
Company: In Transition
(CFO, In Transition) |

Make sure to keep careful records of your expenditures as you spend down the restricted gift. If you receive more than one restricted gift, you will need to allocate separate expenditures to each gift. If you are audited, your auditors will want to see the paper trail of how the restriction was released. Simply making copies of invoices from the contractor will suffice.

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