Even though I do accounting, I really wanted to more comment on what you're doing. I'm an animal person and puppy mills just make me sick. I really appreciate the work you're doing!!
As for the question, not-for-profit is a specialized area that I don't really do. I was the treasurer of a community organization once, and I recorded donations as income, and then the expenses as expenses. We did receive some money that was meant to be for particular expense items and still treated them separately. The treasurer before me did it this way also. But nothing saying this was correct.
Hopefully someone who knows this specialty area better can actually answer this. Like I said, I really more wanted to say thanks for the work you do.