How to Track Restricted Funds in QuickBooks

By David Roberts

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Restricted funds is the term given to monies given to a nonprofit organization for a specific purpose. A church may have restricted funds given to construct a building or give to a specific mission group. Unlike the general funds, which can be used in any area deemed necessary by the church, the restricted funds use cannot be changed from the intended purpose. If you are using the Non-Profit edition of QuickBooks, it's a simple matter of assigning a type of payment given the title, "Restricted Funds." If you are using the more generic "Pro" or "Premier" versions it's more difficult.

Using the "Class Tracking" Method

Step 1

Turn on the "Class Tracking" feature in your QuickBooks program. To do this, click on the "Edit" button on the top menu bar. Scroll down to the "Preferences" button on the bottom of the list and click.

Step 2

Find the "Accounting" tab. When the "Preferences" window opens, scroll down to the "Accounting" tab and click on it. Click on the "Company Preferences" tab and look in the upper portion of that window. Click on the "Use Class Tracking" box.

Step 3

Create a class for each type of donation. Unrestricted Funds would be all general donations given that are used for the general funds budget. Restricted Funds would be another class. You would do this by clicking on the "List" button on the top menu bar, scrolling down to the "Class List" and double-clicking on it.

Step 4

Add the new classes to the class list. Hold the "CTRL" and "N" keys when the "Class List" screen is open. Name the first class, "Unrestricted Funds" and click "OK." For the restricted funds, if you have more than one project to which people are donating, you can create a parent class entitled "Restricted Funds." For example, if you have a building project and a missions project, create a class entitled "New Building" and another entitled "Missions" and check the box labeled "Sub-Class Of" for each, then click "Restricted Funds" as the parent class.

Using the Bank Account Method

Step 1

Open a separate bank account for each restricted funds project. Create a new bank account in QuickBooks for each project. You do this by clicking on the "List" button in the top menu bar. Scroll down to the "Chart of Accounts" and click on it.

Step 2

Hold the "CTRL" and "N" keys to open the "Add New Account" screen. Click on the "Bank" button and then "OK." Name the account based on its purpose, "First Bank - Restricted Funds - Building" or "First Bank - Unrestricted Funds."

Step 3

Create two income accounts. To do this open the "Chart of Accounts" again and hold the "CTRL" and the "N" keys. Click on the Income button and on "OK." One account should be named "Restricted Funds Received" and the other "Unrestricted Funds Received."

Step 4

Deposit restricted funds into the correct bank accounts. Click on the "Make Deposits" icon, which will open the deposits window. Enter in the name of the donor, the amount of the donation and the income account to which the donation is deposited. Click "OK" and the deposit is recorded.

Using the Subbank Account Method

Step 1

Create a subbank account for each type of donation. If opening more than one bank account is not an option, you have the option of creating a subbank account for each type of donation. Open the "Chart of Accounts" again.

Step 2

Click on the "Bank" button and open the new account screen. Name the bank account, "Restricted Funds" and click into the box labeled, "Sub-account of." Click the parent bank account you currently are using and assign this "Sub bank account" to that bank.

Step 3

Deposit donations to the "Sub-Account" if they are for restricted funds. This will allow you to complete one bank reconciliation for all donations given and deposited into the one bank account. If the donation is for unrestricted use, deposit the amount into the parent bank account.

References

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