Question

Quick care, a not-for-profit organization, received an externally restricted contribution. quick care does not have a separate restricted fund for the contribution. under the restricted fund method, the contribution will be recognized as which of the following?

a. revenue in the general fund using the deferral method.
b. revenue in the endowment fund.
c. none of the other options are correct.
d. a direct increase to net assets.
e. revenue in the general fund for unrestricted contributions.

Answer 1

When a not-for-profit organization receives an externally restricted contribution and does not have a separate restricted fund for it, the contribution will be recognized as revenue in the general fund using the deferral method.

Step-by-step explanation:

When a not-for-profit organization, like Quick Care, receives an externally restricted contribution, and it does not have a separate restricted fund for the contribution, the contribution will be recognized as revenue in the general fund using the deferral method. This means that the contribution will be reported as a liability until it is used for its intended purpose. Then, it will be recognized as revenue in the general fund. This is the appropriate method to account for externally restricted contributions in such cases.