Question

Compare and contrast unrestricted, temporarily, and permanently restricted contributions. Describe the difference between unconditional or conditional pledges and how they may be accounted for.

Answer 1

1.Unrestricted contributions are those contributions where the Donor will not impose any restriction on the contribution made.

2.Temporarily restricted contributions are those where donor will impose some restrictions.These restrictions will be satisfied in the future period.The future period will be generally one year.After certain period these will be classified as unrestricted contributions after the restriction is completed.

3.Permanently restricted contributions are those with permanent restriction which means donation should be permanent for example Asset contributed should be permanent but may permit to use all or some of the amount received from the asset can be used.charities will list them as separate category of assets.

Difference Between unconditional and conditional Pledges

1.Pledge without any conditions is called as unconditional pledge.The donor will pledge only when some condition is met is called as Conditional pledge.

2.Unconditional pledge is recorded as a Revenue.It may also be accounted as a Accounts Receivable.

3.Pledge should be recorded only when there is an evidence from the Donor.