A private college received a grant of $40,000 with purpose restrictions in 2011.In 2012 funds were expended for the purpose outlined in the gift; however,it was not possible to determine whether the restricted funds or unrestricted funds were used.The presumption should be:

Question

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The presumption should be that restricted funds would have been used first as they come with specific purpose restrictions. If the college used unrestricted funds first, it would make it difficult to track and ensure that the grant money was used for the intended purpose. Therefore, it is generally assumed that organizations will use restricted funds first to comply with proper accounting practices.

A Private College Received a Grant of $40,000 with Purpose