A designation is a purpose with a name: the building fund, the food programme, general purposes. Donors give to designations, and the designation decides where the money posts: each one names an income account, and posting a donation credits that account. The standard chart's Donation Income group carries accounts for unrestricted giving, restricted giving and grants, so the restricted/unrestricted line a charity must honour is drawn in the chart itself, and each designation simply points at the right side of it.
A designation's giving is followed in two places that agree: its income account in the ledger (Chapter 7), and Donations by Designation (§12.9) — the period's giving purpose by purpose. A designation made inactive leaves the pickers for new gifts; its history and its account stand untouched. Changing a designation's income account re-points future postings only — gifts already posted stay posted where they were posted.