In this article
A restricted fund contains resources that must be used for a specified purpose under the relevant INPAS criteria. A fund is not necessarily a separate bank account, and it is not the same thing as a project or a donor. With Banana Accounting+, you can use segments to identify funds, cost centres to monitor projects and donor centres to track individual contributors, all within the same accounting entries.
This guide uses illustrative examples from the INPAS Banana templates. The amounts are in EUR, and opening balances are assumed to be zero.
First, distinguish a restriction from a delivery obligation
Two donations may both be earmarked for a purpose, but they do not necessarily have the same accounting treatment:
- Restricted donation without a delivery obligation: a donor gives money for a particular purpose, without imposing a qualifying delivery obligation. When the NPO controls the money or has a right to receive it, the donation is generally recognised as income, attributed to the appropriate restricted fund.
- Grant with a delivery obligation: a funding agreement requires the NPO to complete an identifiable, enforceable activity or deliverable. If the money is received before that obligation is fulfilled, the amount is initially recorded as a liability, not grant income. Revenue is recognised when, or as, the obligation is fulfilled.
A restriction on how money may be spent does not automatically create a delivery obligation. The terms of the agreement must be assessed before choosing the entry.
Receiving a restricted donation without delivery obligations
On 10 January 2026, the association receives EUR 727 from Benjamin Foster for Project 1. The donation is restricted to Fund A, but does not include a qualifying delivery obligation.
Double-entry accounting
- Date: 2026-01-10
- Description: Restricted school fund donation month 1 [INPAS:C1:without]
- Debit account: Bank A
- Credit account: Grants restricted Project 1 A
- Amount: 727.00
- CC2: Project 1
- CC3: Benjamin Foster
Income & Expense accounting
- Date: 2026-01-10
- Description: Restricted school fund donation month 1 [INPAS:C1:without]
- Income: 727.00
- Expenses: leave empty
- Account: Bank
- Category: Grants restricted Project 1 A
- CC2: Project 1
- CC3: Benjamin Foster
Result: EUR 727 increases the bank balance and is recognised as income attributable to Fund A.
Paying project expenses
On 12 January 2026, the association pays EUR 307 for school programme expenses.
Double-entry accounting
- Date: 2026-01-12
- Description: School programme expenditure month 1
- Debit account: Expenses Project 1 A
- Credit account: Bank A
- Amount: 307.00
- CC2: -Project 1
- CC3: leave empty
Income & Expense accounting
- Date: 2026-01-12
- Description: School programme expenditure month 1
- Income: leave empty
- Expenses: 307.00
- Account: Bank
- Category: Expenses Project 1 A
- CC2: -Project 1
- CC3: leave empty
Result: considering these first two transactions alone, Fund A has EUR 727 of income and EUR 307 of expenses, producing a surplus of EUR 420. The CC2 analytical centre also shows EUR 420 because income is added and expenses are subtracted.
Receiving an advance with delivery obligations
On 11 February 2026, the association receives an advance of EUR 3,000 attributed to Olivia Reynolds. The funding agreement includes qualifying delivery obligations that have not yet been fulfilled.
Double-entry accounting
- Date: 2026-02-11
- Description: Fund B advance with enforceable delivery obligations: NOT income
- Debit account: Bank B
- Credit account: Grant oblig. liability B
- Amount: 3000.00
- CC2: leave empty
- CC3: Olivia Reynolds
Income & Expense accounting
- Date: 2026-02-11
- Description: Fund B advance with enforceable delivery obligations: NOT income
- Income: 3000.00
- Expenses: leave empty
- Account: Bank
- Category: Grant oblig. liability B
- CC2: leave empty
- CC3: Olivia Reynolds
Result: the bank balance increases by EUR 3,000 and a corresponding liability is recognised. The advance is not yet grant revenue and does not increase Fund B's net assets.
In the Income & Expense model, Grant oblig. liability is an account defined in the Accounts table. Although it is entered in the Category column, the amount is reported as a liability rather than revenue.
CC2 is deliberately left empty because the project has not yet earned this income.
Recognising revenue after fulfilling delivery obligations
On 27 May 2026, the association achieves a milestone under the grant agreement and recognises EUR 1,200 as revenue.
Double-entry accounting
- Date: 2026-05-27
- Description: Recognition of part of Fund B advance, milestone achieved [INPAS:C1:with]
- Debit account: Grant oblig. liability B
- Credit account: Grants restricted Project 2 B
- Amount: 1200.00
- CC2: Project 2
- CC3: leave empty
Income & Expense accounting
- Date: 2026-05-27
- Description: Recognition of part of Fund B advance, milestone achieved [INPAS:C1:with]
- Income: 1200.00
- Expenses: leave empty
- Account: Grant oblig. liability B
- Category: Grants restricted Project 2 B
- CC2: Project 2
- CC3: leave empty
Result: EUR 1,200 is transferred from the grant liability to recognised income. No additional money enters the bank. After this transaction, EUR 1,800 of the original advance remains a liability.
The tutorial includes a second milestone of EUR 1,200 on 10 October 2026 (TX240154). After both milestones, the remaining liability relating to this EUR 3,000 advance is EUR 600.
How to interpret the accounting results
Considering only the first four example transactions, and not all other transactions recorded in the annual tutorial:
- Bank: EUR 3,420 (EUR 727 received, less EUR 307 paid, plus EUR 3,000 received in advance).
- Outstanding delivery obligation liability: EUR 1,800 after the first milestone.
- Recognised income: EUR 1,927 (EUR 727 for Fund A and EUR 1,200 for Fund B).
- Expenses: EUR 307 for Project 1.
- Net assets generated by these four transactions: EUR 1,620, consisting of EUR 420 for Fund A and EUR 1,200 for Fund B.
The advance is therefore correctly distinguished from revenue. It increases the bank balance immediately, but affects the reported income only when the related delivery obligations are fulfilled.
Fund transfers, opening balances and reporting
- No fictitious bank payments: moving an amount from unrestricted to restricted net assets is not automatically a movement of cash. Do not record a bank payment just to create a fund balance.
- Transfers must be permitted: INPAS allows transfers between funds only where legally permitted. Describe and reconcile them in the fund movement disclosures.
- General Fund: The INPAS tutorials include a dedicated :General segment for the unrestricted General Fund. This allows general transactions and transfers involving unrestricted resources to be identified separately from restricted funds. INPAS does not require this particular segment code; it is a practical organisational choice within Banana Accounting+.
- Opening balances: opening balances assigned to individual segments may require dedicated segment opening entries or the appropriate carry-forward procedure in Banana.
- Fund reconciliation: for each relevant fund, explain its purpose and reconcile the opening balance, recognised income, expenses, other changes, permitted transfers and closing balance. Do not treat a segment card's total as the net assets of that fund.
INPAS reporting reminder
Fund accounting is covered by INPAS, while revenue from grants and donations with or without delivery obligations is covered by INPAS. Banana provides detailed ledger and reporting tools to prepare this information, but the NPO remains responsible for assessing its grant agreements, allocating transactions correctly, preparing the required statements and completing the explanatory notes.