You receive donations or grants designated for a specific
purpose that you have to spend within a calendar year. For instance, if you
receive a donation explicitly for cancer-suffering children, you can’t use that
fund for HIV or any other life-threatening diseases.
As you are not free to use funds however you please, it is
called restricted funds or donor-designated funds. The complexities of
restricted funds present unique nonprofit
bookkeeping and accounting challenges, which is not the case in regular
accounting.
Read More on Demystifying Fund Accounting Basics for Nonprofits:
A Unique Approach
