I am doing the bookkeeping for a small nonprofit. I have experience in for profit orgs. But not nonprofit. Is it correct to make an entry debiting accounts receivable and crediting temporarily restricted assets upon notification of a grant? I had already recorded the receipt of the grant as a debit to cash and credit to donation revenue. What is the entry to reduce accounts receivable when cash is received?

If you have already recorded the receipt why would you record it a second time? You might want to give the Grant its own revenue category so it doesn't confuse the total of actual donations. If you have recorded this transaction in accounts receivable then the correct entry is to credit accounts receivable and if the grant is tied and cannot be immediately expended then it would be correct to quarantine it in liabilities, but otherwise you would credit grants received