How to Record a Donation Restricted by the Donor for a Specific Project
Recording cash received with donor-imposed restrictions for a specific program, tracked separately from unrestricted funds.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash (Restricted) | Asset (+) | 5,000.00 | - |
| Contributions Revenue (With Restrictions) | Revenue (+) | - | 5,000.00 |
💡 Accountant's Note
Under FASB/IFRS, you must track restricted revenue separately to ensure the money is only spent on the donor's specified project.
Practitioner & Systems Framework
💻 ERP Architecture
Maintain a separate fund or project code in the ERP for each restricted gift. Restricted cash should be held in a designated bank account or tracked via sub-ledger so the balance can be demonstrated to the donor at any time. Revenue is recognized when received (purpose restriction only, no performance barrier). Releases from restriction occur when qualifying expenditure is made.
⚠️ Audit Flags
Auditors test that restricted funds are spent only on the donor-specified purpose. Any expenditure from a restricted fund for a different purpose requires donor consent or reversal. The restricted cash balance at period-end must reconcile to the unspent restricted grant balances per the grant register.
📄 Required Documentation
Donor letter or grant agreement specifying the restriction, restricted fund ledger, restricted cash balance, expenditure records confirming use for the specified purpose, and donor reporting on fund utilization.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.