Hey,

I have a situation here:

Last fiscal year, we accrued the balance of the multi-year grant: Debit - unconditional promise to give  Credit--foundation specific request

This fiscal year, we found that partial accrual should be reversed. what should the journal entry be, then....Debit: revenue ( current year), credit: unconditional promise to give 

 OR,

 Just take this out as: Debit-- restricted fund;  Credit -- unconditional promise to give

thanks! 

Part of the consideration in how to make this kind of entry is the amount of the transaction to be reversed -- in other words, is the amount "significant".  If you're talking about a few hundred dollars in a business worth millions, then you could take it out of current revenue.  The advantage here is that you do not have to amend the prior year' financial reporting.  It is, however, not the "right" way.

Since the original transaction was in a prior year (one or 15, it doesn't matter), the correct way to reverse it is through whatever fund was involved when the trasaction was recorded.  If it is for an insignificant amount, the financial statement and information return preparer may decide that a note about the exception will suffice.  If it is for a significant amount, then the statement and returns will have to be amended.  My opinion:  do it right, and let the preparer worry about how to report the reversal.

Melissa Farrell

The Carmel Foundation