How to Set up and Track Restricted Funds in QuickBooks?

Money that has been set aside for a certain use or a short period of time is referred to as […]

Money that has been set aside for a certain use or a short period of time is referred to as a QuickBooks Restricted Funds. It frequently has to do with the money those donors to charitable or endowment funds hold. QuickBooks has a variety of methods for doing this if you’re prepared to account for the limited monies. Setting up and managing limited money in QuickBooks are simple it all due to the Class Tracking function, bank account, and sub-bank account.

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In addition, you can move money from the Restricted Funds account into the General Funds account. It should be emphasized that violating the limits or using the limited money improperly might result in legal action. In this article you will study that how you can set and track the restricted funds.

What are QuickBooks Restricted Funds?

A reserve account is essentially what a limited fund is. It has money in it that can only be used on certain things. Restricted funds are also frequently linked to the money held by endowments, insurance providers, and nonprofit organizations. QuickBooks restricted funds provide contributors confidence that their gifts are being utilized as they have chosen.

In QuickBooks, How do I Account for Restricted Funds?

The limited funds in QuickBooks may still be set up and tracked in several other ways even when consumers don’t have the direct choice to do so.

For example, using QuickBooks Class Tracking tool, you may continue with accounting for limited monies. Additionally, you may set up a bank account and a sub-bank account to record limited money in QuickBooks.

Method 1: Managing Restricted Funds using Class Tracking Feature

Use the Class Tracking function to keep track of the monies that are limited. Assigning the limited money to the class will be made easier as a result. The limited funds report can then be performed after that. The limited money in the register can be returned by selecting the specific filter at that time.

Step 1: Enabling the Feature of Class Tracking

First of all you have to enable the Class Tracking function in QuickBooks. You may use this to add the specific classes for each form in QuickBooks. For this you have to access the Edit menu and then select the Accounting menu or the Preferences tab, as appropriate. The class tracking option may then be enabled from the Company Preferences tab.

  • First you have to select the Edit option by navigating to the top menu.
  • Next you have to select the Preferences by scrolling down.
  • Now you have to click on the Accounting option.
  • Open the Company Preferences tab by clicking on it.
  • Set the Use Class Tracking by selecting it to Yes. You can save these settings and restart your system.

Step 2: Adding of the Custom Classes

Step 3: Running of the Report of QuickBooks Restricted Funds

Method 2: QuickBooks Restricted Fund Accounting by using Bank Account

To set up the restricted accounts using a bank account, you just need to register a different bank account for each of your limited money. Once that is done, you may name the income account appropriately. Later, you might get ready to deposit the money into the right bank account with the limited funds.

Step 1: Adding of New Bank Account

You can record the limited money by setting up a different bank account. Go to the Lists menu, choose QuickBooks Chart of Accounts from the menu, and add a new bank account to set up a bank account for each project. The account name, for example, must be entered exactly.

  • First you have to press the List menu button.
  • Now you have to select Chart of Accounts from the alternatives by moving down the list.
  • Press Ctrl + N key together on keyboard. The Add New Account window will open in front of you.
  • Navigate to Bank option in the menu.
  • Hit the OK button.
  • According to the purpose, you may put the name of the account here. As an illustration, “First Bank for Unrestricted Funds” or “First Bank for Restricted Funds.

Step 2: Setting up two Income Accounts

You must set up the two-income accounts in QuickBooks after setting up the bank account. To achieve this, you must add an income account by opening the QB Chart of Accounts. Based on the purpose of the account, the name should be entered accurately.

  • The Chart of Accounts option is to be clicked first.
  • Press Ctrl + N button together.
  • Click the Income menu item.
  • Press the OK key.

According to the purpose, you may put the name of the account here. Take “Restricted Funds Received” or “Unrestricted Funds Received” as examples.

Step 3: Make a Deposit

When you have a bank account and an income account, you are ready to proceed with depositing the limited cash into the appropriate bank account. To accomplish that, you must first choose the Make Deposits option, after which you may begin entering the pertinent information contribution amount, income account, etc.

  • Select the link that is Make Deposits. A Deposits screen will appear on screen now.
  • The name of the donor, the amount of the contribution, and the income account where the donation will be put can all be entered here.
  • Now you may click OK to save the deposit.

You may use your bank account to set up the limited money by following these procedures. You only need to open a bank account, set up an income account, and then deposit money into the bank account along with the necessary information.

Method 3: Recording of the restricted funds in QuickBooks by using SubBank Account

If you are unable to set up numerous bank accounts, you will be able to do so by creating a sub-account for each form of gift. Open the COA menu, select Add New Account from the drop-down menu, and then input the bank account name to create the sub-bank account for each type of gift. Next, choose the sub-account and give the bank ownership of it.

  • Click on the Chart of Accounts option in order to access it.
  • Select the Bank from the subsequent menus and then click on a new account; page will appear in front of you.
  • The name of your bank account can be entered here. For illustration, Restricted Funds.
  • Click the checkbox which is next to Sub-account.
  • Select the parent bank account which you are presently utilizing by clicking on it.
  • Assign the bank to the Sub-bank account.
  • Your Sub-account is now ready for the donations which are to be deposited.

By following these procedures, you may complete in one bank reconciliation for the contribution that was given and added to one bank account. If the contribution is unlimited, you must deposit the full amount into your parent’s bank account.

The Basics of Managing Restricted Grants

It is a widespread misperception that grants and donations, other people’s money and they are used only to fund charitable organizations. While it is untrue, it is TRUE that dealing with NGOs has a number of unique challenges, including the requirement to appropriately account for restricted donations. QuickBooks Online may be a useful and economical tool for charity organizations if it is set up and maintained correctly. It even offers several choices that aren’t there in the desktop version.

In Some Organizations, Restricted Contributions are Managed in the Chart of Accounts

In order to administer the organization and report to the IRS on the yearly 990 filing, you should monitor the natural categories of revenue and cost by using the chart of accounts.

What Exactly do Natural Categories of Contributed Income Entail?

  • Private Donations
  • Organizational & Foundation Grants
  • Federated Fund Distribution
  • Public grants and contracts

What Exactly are not the Natural Categories?

  • Fantastic Foundation
  • Given by Langford
  • Contributions without restriction
  • Specified Grants

Don’t utilize accounts that need to be translated or added up on a calculator to flow to your 990 in order to save the tax preparer time and be a wise steward of the organization’s funds.

Managing Restricted Contributions may be Attempted by Some Organizations by using Classes

Due to number of reasons it is not recommended:

  • Program, Management and General, and Fundraising classes are excellent for maintaining the data required for the Statement of Functional Expense.
  • Regularly, limited grants will pay for expenditures that span many functions, leaving you to decide which class to assign them to. Add the grant class in the code. You can write the code to the program class? Wherever feasible and then end the conflict.
  • The grant is not the program, even if there is a 1:1 correspondence between it and its source of money.
  • It can’t grow in size.

What is the Best Way to Manage Restricted Grants in QuickBooks Online?

In the Customer list, you can easily keep track of limited contributions. Every restricted donation originates from one of three sources: individuals, foundations, or governmental organizations. Your consumer is that resource.

A nonprofit organization may have contributors, members, students, and clients; treat everyone who provides you money as a customer.

Setting of Individual Restricted Funds as a Sub Customer

This enables you to follow expenditures back to each funds using the Customer/Project field on expense transactions, and to view the income from each award individually. In the spending tab of Account & Settings, you must first enable Track expenses and items by customer before using this feature.

Run a Profit & Loss by Customer report with that specific sub-customer filtered out and the date range defined for the appropriate time period when you want to view the activity on the funds and know the limited amount.

Another Choice is Available with QuickBooks Online: Projects

You must first enable “Use Project Financial Tracking” under “Account & Settings” Advanced Tab in order to utilize this function.

Projects perform many of the same tasks as sub-customers. On expenditure transactions, you use the same Customer/Project field to allocate charges to them. The modern, continually evolving Projects Centre is what sets it apart. The Projects Centre gives you a dashboard view of all of your restricted funds at once, from the time they were first awarded to the present.

Scroll down to specific Grants

Scroll down to see detail about Material and Supply from the project.

Simply designate the grant as Complete in the Projects Centre after it has been completed. With all of your data still intact and an easy way to return to it later, it is removed from the dashboard in this manner.

How to Return the Restricted Funds to the General Fund Account?

If the limited funds are visible in the Chart of Accounts for both accounts, users can move them between them with ease. You can transfer funds from the restricted funds account to the general funds account using this tool. You must select the proper bank account; enter the required amount, and the proper date in order to transfer restricted money. The Chart of Accounts in QuickBooks can be rearranged as necessary.

  • First you have to activate the new button by clicking on it from the menu.
  • Select the Transfer button.
  • Select the Transfer Funds From option and the bank account that the funds will be coming from here.
  • In order to select the bank account where you wish to deposit the funds, click the Transfer Funds To option.
  • The amount you wish to send should then be included in the Transfer Amount box.
  • After finishing, modify the Date for transmitting the funds.
  • In last you have to click on the save and close button and then restart it.

By doing so, you may use QuickBooks to move money from one account to another. The sum is reflected in the General Funds account as you go through these processes.

How to Show Restricted Funds in QuickBooks Reports

After entering the classes you have to follow and enable class tracking, following steps shows that how to show these funds in your reporting:

  • First you have to select reports button.
  • Now hit the Report Options button.
  • After that, select the Standard tab and go through the different report kinds until you get to profit and loss by class.
  • After running this report, your balance sheet will now show a column for each restricted item as well as its corresponding actions.

This grant is used specifically by nonprofit organizations. However, QuickBooks allows you to directly track it. You may do this by setting up a bank account and a sub bank account and using the Class Tracking tool. You can use these techniques to enter accounting for limited monies in QuickBooks. The Restricted Funds account can be transferred into the General Funds account as needed.

This should help you better understand how to set up and track restricted funds in QuickBooks, If you are not able to do this you can connect with Dancing Numbers experts via LIVE CHAT.

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Frequently Asked Questions

What is a Restricted Fund?

How can You Keep Track of Restricted Funds?

Is a Restricted Fund is an Assets or a Liability?

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