USA Recording a Pledge

[fcheramie22]

Hello, this is the first time I post on this site. I work for a non profit, but we rarely deal with pledges. I was wondering if someone could verify with me if I was recording the initial entry to book a pledge correctly and the recording of the actual receipt of cash. Thank you so much for your help.

Initial Entry for Booking Pledge:

Debit -- Pledge Receivable $5K (for year 2012)
Credit -- Pledge Contribution Income $5K (for year 2012)

First Pmt on Pledge:

Debit -- Cash $1K (12/30/2012)
Credit -- Pledge Receivable $1K (12/31/2012)

Again thank you so much for any help that you can offer!

 

[bklynboy]

US GAAP accounting can be found in FAS 116/117. Assuming these pledges are unconditional pledges then you can record the revenue in the period the pledge is made and your journals are correct.

However, this pledge should be categorized as restricted (due to time) to make clear that these are not unrestricted assets of the not for profit. Also, if the pledge extends beyond one year, then US GAAP requires you to discount the amount. See AICPA article on this topic.

CPA Journal Online

 

[numbersguy]

How to book pledges made and paid at a nonprofit

Regarding the below entry for posting a pledge made and then paid, how is the actual donation posted? From what I understand a pledge is revenue to the nonprofit but it is not a donation by the donor until payment is received. Most of us use accounting software to record donations made. when payment is rec;d on a pledge, we CR donations and DB cash. I cannot CR both donation revenue and pledges rec'vable at same time.

Any suggestions?
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Initial Entry for Booking Pledge:

Debit -- Pledge Receivable $5K (for year 2012)
Credit -- Pledge Contribution Income $5K (for year 2012)

First Pmt on Pledge:

Debit -- Cash $1K (12/30/2012)
Credit -- Pledge Receivable $1K (12/31/2012)