QuickBooks Restricted Funds: Methods to Setup and Track

QuickBooks Restricted Funds

QuickBooks restricted funds are meant for using the money for certain purposes. Prior to using these funds, it will be necessary that you set them up. Do you know how to set up these funds in the QuickBooks software? If not, then allow us to help you out. We have helped multiple QuickBooks users to set up restricted funds. 

Furthermore, we will guide you in knowing the difference between restricted and unrestricted funds for your improved knowledge. After setting up the restricted funds, in case you would like to track them too, you can browse through the methods for the same.

Take a look at the contents of this post to know everything that we will be reading here.

What are QuickBooks Restricted Funds?

QuickBooks restricted funds work similarly to reserve accounts in which you can keep the money for particular purposes. To every donor, the restricted funds give the reassurance that their contributions will be used just like they wanted to. Simply put, restricted funds refer to the ones which a charity’s trusty has to spend in some specific ways or due to certain specific reasons, depending upon an offer’s funding letter or service contract. Additionally, the trusty may want to spend the restricted funds as has been directed by a donor.

Difference Between Restricted and Unrestricted Funds in QuickBooks

In QuickBooks, the restricted funds can be understood as a kind of capital. This capital is stored for a particular purpose. This means that these funds are restricted only for that particular purpose. So, they can’t be utilized for a purpose or expense other than the one which has been specified. Contrastingly, the unrestricted funds in the QuickBooks software may be utilized for a legal purpose of any kind. However, the utilization of these funds will depend on the decision of an organization that they are appropriate for use with respect to a legal purpose.

How to Set up Restricted Funds in QuickBooks?

Prior to using the restricted funds in QB, it will be required that you set them up in the software. For setting these funds, you will need access to your QuickBooks account. Via Reports, you can pick the Company and Financial option. You will have to opt for the Balance Sheet by Class Report. After this, click on the Customer Report option. Via the Account Filter, opt for Multiple Accounts. After a few more steps, the setup of restricted funds will be done.

1. Access your “QuickBooks Account”.

2. Click on the menu of “Reports”.

3. Tap on “Company and Financial”.

4. Choose the option of “Balance Sheet by Class Report”.

5. Press the button named “Customer Report”.

6. Now, you will be able to locate the option of “Account Filter”.

7. Click on “Multiple Accounts”.

8. Choose all the accounts which you would like to see.

9. Then press “Ok”.

10. Go to the section of “Class Filter”.

11. Click on “Multiple Classes”.

12. Select the class for viewing.

Now, the setting up of the QuickBooks restricted funds will be complete. You can start using them right away.

How to Track Restricted Funds in the QuickBooks Software?

Managing the restricted funds using QuickBooks will be easier when you can track them. For tracking them, you can follow 2 methods. The first method will help you in tracking the restricted funds via class tracking. The second method will guide you in doing this via the bank account. Now, let us read the steps of these methods for executing them in the correct way.

Option 1: Tracking Restricted Funds in QB via the Method of Class Tracking

For tracking the restricted funds in QuickBooks, you can utilize the method of class tracking. This method demands that you run the software and tap on Edit. Via Preferences, you can head to the Accounting tab. Ensure that Use Class Tracking has been chosen. You can initiate the steps for making a class for every type of donation. The Class List option in List will be useful for this purpose. After making a class for restricted and unrestricted QuickBooks funds, you will be able to track them.

1. In the “QuickBooks” software, tap on “Edit” provided at the top.

2. Press the button of “Preferences”. You can find this button at the bottom of the visible list.

3. Open the tab named “Accounting”.

4. The window of Preferences will get launched. In this window, you will find “Accounting” on scrolling down. Click on this tab. 

5. Tick the “Use Class Tracking” option.

6. For the donation of each type, you can make a class. Click on “List” in the menu bar. Below this, you will find the option of “Class List”. You can click twice on it.

Note for You: The unrestricted funds will be considered as general donations in case they are being used for the budget of general funds. For the restricted funds, you will have to create another class. 

7. New classes have to be added to the “Class List”. For this, you can press the “CTRL” key and “N” key when the screen of “Class List” opens. 

8. “Unrestricted Funds” should be the name given to the 1st class.

9. Then press “Ok”.

10. In case of the QB restricted funds, you may be having more than a single project for which the people are giving donations. One parent class can be made for the same. You can name it “Restricted Funds”.

Option 2: Tracking Restricted Funds in QB via the Method of Bank Account

Now, let us look at the second method for tracking your restricted funds. This will be done via the bank account. An individual bank account will have to be created for all the projects of the restricted funds. You can do this using the Chart of Accounts in the List option. Then you can enter the screen of Add New Account. After clicking on Bank, you can write the account’s name. Using the Chart of Accounts, you can make 2 income accounts, one each for restricted and unrestricted funds.

1. See to it that you have opened an individual bank account for every project of the restricted funds. In case a separate account has not been made, you can tap the button named “List”.

2. Then select the option of “Chart of Accounts”.

3. Press the combination of keys given as follows:

“CTRL” key + “N” key

accounting for restricted funds in quickbooks

4. As you enter the screen of “Add New Account”, you will find “Bank”. Click on it.

5. Press the “Ok” button.

6. Enter a “Name” for the account, depending upon the purpose of it.

7. Make at least 2 “Income Accounts”. For this, you can access the option of “Chart of Accounts”.

8. Then press the keys mentioned as follows at the same time:

“CTRL” key + “N” key

9. Select “Income”.

10. Then press “Ok”.

11. Name one account as “Restricted Funds Received”.

12. Name the next account as “Unrestricted Funds Received”.

13. Ensure that the restricted funds have been deposited in the right bank accounts.

14. Select “Make Deposits”.

15. In the window of “Deposits”, provide the donor’s name.

16. Then input the donation amount.

17. Enter the income account in which the donation has been deposited.

18. Now, press “Ok”. After this step, the deposit will get recorded.

In Summary

We hope you found this blog helpful in gaining a lot of information about QB restricted funds. We gave you the best set of steps for setting up these funds in the QB software. After the setup is complete, you can use the restricted funds for the specified purposes. Make sure that after the setup, you are also able to track them by following the two methods given in this blog. 

Let’s invest time in learning about the QuickBooks Automated Password Reset Tool. Read our post now to check out the uses of this tool. Our blog on QuickBook backup and restore is another recommendation for you. 

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