CPA Study Group
Since the $40,000 was earned within the fist year, but not "paid out". Shouldn't the there be an expense for the $40,000 incurred but not paid. Therefore the $800,000 would be an increase in restricted net assets and the $40,000 would be a decrease in unrestricted net assets. There would also be a liability set up for the $40,000 expense. Then that liability would be debited when the $40,000 is actually paid out. Please correct me if i'm wrong.