A Tale of Two Donations
It was the best of funds, it was the…
Chucky D., probably
You know what? Dickens never had to reconcile a church contribution batch.
Two envelopes arrive on the same Sunday. Each holds a check for $500. One check is for the General Fund. The other is for the Missions Fund.
Most churches keep a list of approved giving purposes. PowerChurch and Empower call them contribution funds. Your church may call them giving funds or something similar.
Same amount. Same deposit. Different responsibilities.
A donor restriction is a promise the church agrees to keep: use this gift for a certain purpose or at a certain time. That promise might come from what the donor writes on a check or from a giving option the church offers. The General Fund gift can support the church’s overall work. The Missions Fund gift must be used for the missions purpose the church accepted.
Can Restricted and General Gifts Share a Bank Account?
Short answer: Yes. That is the most common setup.
On Monday, both checks go into the same batch. The bank shows one $1,000 deposit: $500 for general use and $500 for missions.
That is where the church’s records come in. The money can sit together, but the purpose attached to each gift does not disappear.
A church can use separate bank accounts if its policy calls for that, but moving cash from checking to savings does not change the Missions Fund balance. The restriction is tracked in accounting, not by where the cash happens to sit.
Once the deposit reaches accounting, more than the bank balance changes. The bank account shows how much cash came in. The income account shows where that money came from. If the gift has a donor restriction, the restricted balance on the Balance Sheet goes up too.
That restricted balance is not another bank account. It shows how much the church still has to use for the donor’s purpose. Depending on the report, you may see it labeled restricted equity, net assets with donor restrictions, or restricted fund balance.
Donation One: The General Fund Gift
The first check is for the General Fund. Your church may call it Tithes & Offerings or something similar. Some donors write that name on the check or giving envelope. Others give without naming a specific purpose, and the church follows its policy for treating the gift as general giving.
This gift is available for the church’s general ministry and operations. It can help pay for utilities, payroll, ministry supplies, or whatever else leadership approves within the church’s mission, budget, and policies.
When the gift comes in:
- The donor gives $500 to the General Fund.
- The gift is entered under that contribution fund.
- The check is included in the deposit.
- Posting the deposit increases the bank account by $500 and records $500 of general contribution income.
When $200 is spent:
- The church receives a $200 electric bill.
- It records a $200 utility expense. The expense tells the financial reports what the church is paying for.
- When the church pays the bill, the bank account decreases by $200.
Nothing else needs to happen. The donor gave the money for general use, so there is no restricted balance to reduce and no release to record.
Donation Two: The Missions Fund Gift
The second check is for the church’s approved Missions Fund. The donor wrote Missions Fund on the check, and the church accepted the gift for that purpose. The money can now be used only for work covered by that fund.
When the gift comes in:
- The donor gives $500 to the Missions Fund.
- The gift is entered under that contribution fund.
- The check is included in the same deposit.
- Posting the deposit increases the bank account by $500 and records $500 of missions contribution income.
Because this gift has a donor restriction, the same posting also increases the restricted Missions Fund balance on the Balance Sheet by $500. This balance shows how much remains available only for the Missions Fund’s accepted purpose.
When $200 is spent:
- The church buys $200 of disaster response supplies that fit the Missions Fund’s purpose.
- It records a $200 expense. The expense tells the financial reports what the church bought.
- Because the expense fits the donor’s accepted purpose, the church records a $200 release from restriction. A release is the accounting entry that reduces the amount still shown as restricted. It does not move cash.
- When the church pays for the supplies, the bank account decreases by $200.
- The restricted Missions Fund balance decreases from $500 to $300.
- The reports show $500 received, $200 used for missions, and $300 remaining.
Skip the release, and the reports will still show $500 as restricted even though only $300 remains for future missions work.
What the Reports Need to Answer
By the end of the month, the Missions Fund should tell a simple story: $500 came in, $200 was used for missions, and $300 remains.
Church leaders should be able to answer the same three questions for every donor restriction:
- How much has been received?
- How much has been used for the purpose?
- How much remains?
The bank statement only shows how much cash the church has. It cannot show which promises are attached to that money.
Need help finding those numbers in the reports? How to Read a Church Financial Report Without an Accounting Degree walks through them in plain language.
Use the Broadest Fund That Honestly Describes the Work
Donor restrictions do not require a separate fund for every project, trip, storm, or special request. Whenever possible, use a purpose that is broad enough to remain useful and clear enough for donors to understand.
I once worked at a church where our online giving page eventually grew to more than 20 options. We had several related to missions, three for camp, three for music, plus separate memorial and outreach choices. Each one made sense when it was added. Together, the list required insider knowledge just to choose the right fund, and the accounting setup grew right along with it.
That experience changed how I think about giving funds: use the broadest purpose that still tells donors the truth.
A Missions Fund might support local outreach, disaster response, mission trips, and other approved missions activities.
If the church is helping with hurricane recovery, it might invite people to give to the Missions Fund and explain that current efforts include hurricane relief. That avoids creating a fund that can be used only for one storm.
The wording matters. “Give to the Missions Fund, which supports disaster response and other local, national, and international mission work” keeps the purpose broad. Saying that every gift will be used only for one hurricane response may create a narrower restriction, even if the giving option says Missions Fund.
Sometimes the hurricane response ends before the money does. If donors were told the money would be used only for that response, the board cannot simply move the balance somewhere else. Go back to the original wording and any policy for excess funds shared with donors. If the answer still is not clear, seek donor consent or professional guidance before spending it.
Whatever you call the fund, its name, appeal, and description need to tell the same story. A broad fund gives the church flexibility within an honest, accepted purpose. It should not hide how the church expects to use the gift.
That is different from a board designation. Leadership can set aside general funds for missions and later change that decision. It cannot do the same with a restriction created by a donor.
The church also needs to keep control over which eligible missions efforts receive support. A gift meant for a named person or outside organization can raise different tax and accounting questions.
Not Sure the Process Is Working? Follow One Gift
Choose one recent gift and follow it from beginning to end.
Ask:
- What purpose did the donor communicate, and did the church accept it?
- Which contribution fund was used during entry?
- Where did the gift land in accounting?
- If the gift was restricted, did the correct restricted balance go up?
- When the money was used, were both the expense and the release recorded?
- Do the contribution and accounting records tell the same story?
Both checks reached the same bank account. One gave the church flexibility. The other carried a purpose the church agreed to honor.
Good stewardship is rarely dramatic. Sometimes it is simply making sure a gift keeps the promise attached to it.
Follow the Process in PowerChurch
PowerChurch is hosting a free Office Hour called Donor-Restricted Funds: From Gift Entry to Reporting on Thursday, August 27, from 3 PM to 4 PM Eastern.
The session will cover:
- How gifts with donor restrictions move through the process
- How gift entry connects to reporting
- Where churches commonly get stuck or confused
The Office Hour is for church treasurers, bookkeepers, administrators, contribution secretaries, and anyone who enters gifts or reviews church financial reports.
Register for the PowerChurch Office Hour
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PowerChurch Software connects gift entry to accounting, so churches can see where money came from, what it can be used for, and how much remains.
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This article provides general administrative information and is not accounting, tax, or legal advice. Consult a qualified professional about your church’s specific circumstances or unusual gifts.
