[Verse 1] Sarah opens the donation envelope, check for twenty grand "Educational scholarships only" written in the donor's hand Now she's got to track this money in a separate designated space Temporary restricted funds get their own accounting place [Chorus] Walls around the money, walls around the cash Restricted means the donor says exactly where it goes Unrestricted flows like water through the organization's hands Board decides the mission, donor builds the fence that shows R-E-S-T-R-I-C-T-E-D spells the rules we follow Temporarily bound today, permanently bound tomorrow [Verse 2] Museum gets a million for a brand new sculpture wing Can't use that money for the lights or janitor's cleaning Permanently restricted means forever set in stone While temporarily restricted finds freedom when the purpose is shown [Chorus] Walls around the money, walls around the cash Restricted means the donor says exactly where it goes Unrestricted flows like water through the organization's hands Board decides the mission, donor builds the fence that shows R-E-S-T-R-I-C-T-E-D spells the rules we follow Temporarily bound today, permanently bound tomorrow [Bridge] Net assets with donor restrictions on the balance sheet Net assets without restrictions where the freedoms meet Reclassification happens when restrictions get fulfilled Money moves between the buckets when the purpose has been killed [Verse 3] Homeless shelter gets a grant for winter housing only Come springtime that restriction lifts, money's not so lonely Purpose restriction says exactly what the funds will buy Time restriction says exactly when the funds will fly [Final Chorus] Walls around the money, walls around the cash Restricted means the donor says exactly where it goes Unrestricted flows like water through the organization's hands Board decides the mission, donor builds the fence that shows Segregate the resources based on what the donor wrote Fund accounting fundamentals help us stay afloat
← NFP Accounting Framework & Part III Overview | Revenue Recognition for NFP Contributions →