A not-for-profit organization receives a restricted contribution of $20,000 to be used for a specific project. During the current year, $14,000 is spent toward the project with the balance to be spent next year. How much donation revenue should the not-for-profit organization recognize in the current year, if the organization uses the deferral method of reporting?

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Quizplus · Accepted Answer

With the deferral method, revenue is recognized as the restrictions are lifted, meaning as expenses are incurred towards the specific project. Since $14,000 has already been spent towards the project, the organization can recognize $14,000 of donation revenue in the current year. The remaining $6,000 will be recognized in the following year when the project is completed.

A Not-For-Profit Organization Receives a Restricted Contribution of $20,000 to Be