What is a donor-restricted contribution and how should it be recorded?

• A. Donations with donor-imposed restrictions; recorded as restricted revenue and tracked in restricted funds.
• B. Donations with restrictions are always returned to donor.
• C. Donations are unrestricted revenue regardless of donor intent.
• D. Restricted contributions are recorded as liabilities.

Answer: (A)

Donor-restricted contributions are gifts given with a donor-imposed restriction on how or when the money can be used. They are recognized as revenue, but the amount is recorded in restricted net assets and tracked in restricted funds (temporarily restricted or permanently restricted). The restriction is released to unrestricted net assets when the donor’s conditions are satisfied (for example, a program is funded or a time period has passed). This is why the best description is that these are donations with donor-imposed restrictions recorded as restricted revenue and tracked in restricted funds. They’re not automatically returned to the donor, not treated as unrestricted revenue, and not recorded as liabilities.