Restricted fund

A restricted fund is used by a nonprofit entity to store funds that have a limited use, as per the requirements of donors. An example of a restricted fund is an endowment, where the principal is only to be used to generate investment income, and the uses to which the income can be put may also be restricted. Restricted funds are preferred by many donors, since they can be used to ensure that donations are directed as desired by the donors. Nonprofit entities prefer to not use restricted funds, since donations shifted into these funds cannot be used to pay for general operations.

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Governmental Accounting