Which of the following scenarios would result in an account being labeled as revenue with donor restrictions?

{Hint: Consider the conditions that would place restrictions on the use of donated funds. Which option reflects a limitation on how or when the donation can be used?}

Question

Which of the following scenarios would result in an account being labeled as revenue with donor restrictions?

{Hint: Consider the conditions that would place restrictions on the use of donated funds. Which option reflects a limitation on how or when the donation can be used?}

BlackTom AI · Accepted Answer

Question restatement: Which of the following scenarios would result in an account being labeled as revenue with donor restrictions?

Option analysis:
- Option 1: 'A cash donation that has no restriction' — This scenario describes unrestricted cash donation. Since there are no donor-imposed limits on the use or timing, it would be classified as revenue without donor restrictions, not revenue with donor restrictions. This makes it inconsistent with the question’s focus on restricted use.
- Option 2: 'Land donated and can be used however the organization likes' — This is an in-kind donation (non-cash asset) that appears to be unrestricted in use. Because the donor did not impose any restrictions on how the land can be used, it would typically be recorded as unrestricted in-kind asset revenue, not revenue with donor restrictions.
- Option 3: 'Donations restricted for use in a certain time period' — This scenario clearly reflects a time-based donor restriction. The donor limits when the funds or assets can be used, which creates net assets with donor restrictions (often labeled as temporarily restricted in many nonprofit accounting frameworks). This aligns with the concept of revenue with donor restrictions.
- Option 4: 'All other assets with no donor restrictions' — This describes assets without restrictions, i.e., unrestricted net assets. It does not fit the description of revenue with donor restrictions, so it’s not correct for the question.

Rationale differences:
- The core idea behind donor restrictions is that the donor imposes constraints on use or timing. When those constraints exist, the revenue is recorded as with donor restrictions; when they do not, it is unrestricted.
- Understanding the distinction between time-based restrictions and other types (like purpose or permanence) helps you classify correctly. Time restrictions delay recognition of unrestricted use until the restriction lapses.
- Misconceptions to avoid: assuming any donation is restricted or assuming all land or in-kind contributions are unrestricted without examining donor intent. The presence or absence of donor-imposed limits is the key determinant here.

In summary, among the options, only the scenario where donations are restricted for use in a certain time period reflects a donor-imposed restriction that would lead to revenue with donor restrictions, while the others describe unrestricted or in-kind donations without such restrictions.

SP25-BL-SPEA-V246-multisection Interactive Reading 5

Which of the following scenarios would result in an account being labeled as revenue with donor restrictions? {Hint: Consider the conditions that would place restrictions on the use of donated funds. Which option reflects a limitation on how or when the donation can be used?}

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