I'm doing the accounting for a not for profit foundation. The foundation has signed a pledge to donate $50,000 over a five year period to another non-profit.

I believe we need to record a liability for the funds owed. But I do not believe the offset should go through the income statement. Do I record this as:
Credit to Liability
Debit to Retained Earnings?
If so, how do I label the Retained Earnings account would it be a separate retained earnings account?

Thanks for your help

ST

If you would record the payment against income you should record the liability against income, but this is a contingent liability so it is not a charge against current income. What needs to happen is the liability is disclosed in a note to the accounts because it it contingent upon a future event the continuation of the receiving foundation. What you do is create a provision account to receive the credit and you do an actuarial calculation to determine the charge against current income