What is Endowment Fund?

Endowment Fund. The endowment fund accounts for gifts or bequests with the legal restriction that the principal be maintained in perpetuity (permanently restricted) or until the occurrence of a specified event (temporarily restricted). 

 

Various conditions are possible, depending upon the desires of the contributor. Unless otherwise specified, net gains or losses on the sale of endowment fund assets are increases or decreases of the fund principal.

Endowment fund investment revenue may be restricted or unrestricted. Income is recorded directly in the fund that is to receive it. Such income not subject to any restrictions by the principal donor may be recorded directly in the current unrestricted fund as unrestricted investment revenue. 

 

If the revenue is subject to a restriction, it would be recorded as temporarily or permanently restricted in the appropriate restricted fund.