Restricted Fund
A restricted fund contains money that a donor or grantor has designated for a specific purpose or time period. The nonprofit must use it only as specified — not for general operations.
Restricted Fund Definition
A restricted fund holds contributions that come with conditions attached. The donor specifies how the money must be used (purpose restriction) or when it can be used (time restriction). The nonprofit is legally obligated to follow these restrictions.
Types of Restrictions
Why Restricted Funds Matter
How to Track Restricted Funds in QuickBooks
1. Create separate income accounts for restricted contributions
2. Use Classes or Tags to track spending against each restriction
3. When restrictions are satisfied, record a journal entry releasing funds from "With Donor Restrictions" to "Without Donor Restrictions"
4. Run a P&L by Class to show funders exactly how their money was spent
FAQ
Q: What happens if we accidentally spend restricted funds on something else?
A: You need to replace those funds from unrestricted sources. This is a compliance issue — document it, correct it, and inform your board.
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