A donor had previously donated $2,000 to a nonprofit entity, stipulating that the gift must be used to finance the annual Fall Harvest festival. The festival is held and the gift is used for the stipulated purpose. Which of the following best describes the effect of the journal entries needed to record the expense resulting from use of the gift?

Question

Quizplus · Accepted Answer

GAAP requires that all expenses to be reported in the statement of activities as decreases in net assets without donor restrictions. To accomplish this result, the nonprofit needs to make a journal entry to record the expiration of the restriction, reclassifying net assets with donor restrictions to net assets without donor restrictions. Once this entry is made, the nonprofit should record the related expense with all other expenses in the net assets without donor restrictions column of the statement of activities.

A Donor Had Previously Donated $2,000 to a Nonprofit Entity