What are the Accounting Entries for Recording Pledges?
Suppose that at the end of the 1994 fiscal year, you have two unfulfilled pledges: one is a pledge to make a gift of $1000 during the next year; the second pledge promises gifts of $2,000 per year in each of the next three years, for a total of $6,000. The end-of-year journal entry to record these unconditional pledges is: Pledges receivable $7,000 Contributions Receivable $7,000 To record newly received unconditional pledges When the pledge payment of $1,000 is received in 1995, the entry is: Cash $1,000 Pledges Receivable $1,000 To record receipt of a pledge It is important to note that the $1,000 is recognized as revenue in 1994, and not in 1995 when the cash was actually received. In an example of a conditional pledge, a donor may pledge $25,000 to renovate a half-way house on the condition that the building is purchased. This pledge would be mentioned only in a footnote until the nonprofit buys the building. At that point the pledge would be recorded and recognized as revenue.
