Fund accounting
Restricted and unrestricted kept genuinely separate, so a restriction cannot be spent by accident.
A nonprofit does not have one pot of money. It has funds, each with its own restriction, and spending a restricted dollar on the wrong purpose is a finding in an audit and a breach of the donor agreement behind it.
Every fund carries a classification: unrestricted, temporarily restricted with a purpose or a time condition, or permanently restricted. Transactions post against a fund, and a payment drawn from a restricted fund for a purpose outside its restriction is blocked rather than warned about.
Net assets are reported by classification, which is what Form 990 and your auditor both ask for.
Where everything sits
How to work this page
The restriction is recorded from the grant agreement or gift instrument, including any time condition and the purpose language itself, not a summary of it.
Every bill and payment carries a fund. Nothing posts to a general pool and gets allocated later, because retrospective allocation is what auditors examine hardest.
When a purpose is satisfied or a time condition passes, the amount releases to unrestricted. That release is a recorded event with a date and a reason.
Statement of activities splits by restriction class. The figures reconcile to the ledger and open to the transactions underneath.
On a phone
Every figure from the desktop appears here, stacked rather than reduced. Tables scroll inside themselves so the page never moves sideways, and figures keep their separators and their alignment at every width.
Questions people actually ask
Record it as an amendment against the original gift. The history stays intact, because the question an auditor asks is what the restriction was at the time of the spending, not what it is now.
No. A payment that would overdraw a restricted fund is refused at the point of creation with the fund and the shortfall named.