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GAAP For Non-Profits › General Reporting Matters

Fund Accounting - Restricted Funds

Here again we present the capital fund as it would appear under the deferral method of accounting for contributions. Under the deferral method, current and prior year contributions are deferred and matched against the current amortization of contributed and funded assets.

SpringTime
Capital Fund (Deferral Method)
Trial Balance
December 31, 1999

  Dr Cr
Bank - capital account

150

 
Capital assets - cost 2000  
Accumulated amortization   800
Bank loan - current portion   130
Bank loan   500
Deferred capital contributions   400
Capital fund - opening balance   435
Capital contributions recognized   50
Amortization ($60 relates to funded assets) 100  
Interest expense 65  
  2315 2315

Let us represent the trial balance for the capital fund as a restricted fund, eliminating the deferral of contributions. Under the restricted fund method there will be no revenue to recognize during the year as no capital contributions were received in the year.

SpringTime
Capital Fund (A Restricted Fund)
Trial Balance

December 31, 1999

  Dr Cr
Bank - capital account

150

 
Capital assets - cost 2000  
Accumulated amortization   800
Bank loan - current portion   130
Bank loan   500
Capital fund - opening balance   885
Capital contributions (received in the year)   -
Amortization 100  
Interest expense 65  
  2315 2315

Note that the opening balance in the restricted fund is equal to the opening balance under the deferral method plus the deferred capital contributions and the contributions recognized in the year. This is because under the restricted fund method contributions are recognized immediately resulting in an immediate increase of the fund balance, as the excess of revenues over expenses for the period are immediately impacted by the contribution. Contributions under the deferral method are deferred as a liability, resulting in a lower fund balance as the excess of revenues over expenses for the period will not be impacted until the revenue is recognized.

On the attached page we add the trial balance for the operating fund (still on the deferral method) to the capital fund to create one trial balance for the organization under the restricted fund method.

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