Nonprofits

The short answer: Functional expense allocation means assigning every expense to the function it supports: program services, management and general, or fundraising. Charge costs directly when they clearly belong to one function. Split shared costs, such as an executive director's salary, rent or IT, using a reasonable, documented basis like time records, square footage or headcount. GAAP requires every nonprofit to present expenses by both function and nature and to disclose

The short answer: Restricted funds are gifts a donor has limited to a specific purpose or time period. Under GAAP they're reported as net assets with donor restrictions. Unrestricted funds have no donor-imposed limits and are reported as net assets without donor restrictions. When you meet the restriction (you run the program, the time passes, or the asset is placed in service), you record a release: an entry that moves the amount from "with" to "without" donor restrictions.