How can parents explain the gospel to their children without toning down the commands of Scripture?

Certainly children are limited in their ability to understand spiritual truth, but so are adults. Very few people intellectually understand all the gospel truth at the moment of salvation. Fortunately, the essential truths are basic enough that even a child can understand. Jesus Himself characterized saving faith as childlikeness (Mark 10:15). True belief is not a function of advanced intellect, sophisticated theological understanding, or complex doctrinal knowledge.

Children old enough to be saved can grasp the concept of coming to Christ with an obedient heart, and letting Him be boss in their lives.

When sharing the gospel with a child, keep these points in mind:

1. Remember that repetition and restatement are especially helpful. Give the gospel simply and briefly, but don't assume the first positive response means they got all the truth they need to know. Continue explaining and expanding your explanations. Too many ministries to children equate every positive response with a real conversion.
2. Use Scripture and explain it clearly. Even with children, God's Word is the seed that produces life (1 Peter 1:23). Don't use approaches that give gospel outlines with no Scripture. Only the Bible can speak with authority to the human heart--including a child's heart.
3. Understand the inherent danger in any outline or prefabricated presentation: they tend to follow a predetermined agenda that may bypass the child's real needs or fail to answer his or her most important questions.
4. Finally, remember that the issues in salvation are the same for a child as for an adult. The gospel is the same message for every age group. D. Martyn Lloyd-Jones wrote,

   We must be careful that we do not modify the gospel to suit various age groups. There is no such thing as a special gospel for the young, a special gospel for the middle-aged, and a special gospel for the aged. There is only one gospel, and we must always be careful not to tamper and tinker with the gospel as a result of recognizing these age distinctions. At the same time, there is a difference in applying this one and only gospel to the different age groups; but it is a difference which has reference only to method and procedure (Quoted in Knowing the Times [Edinburgh: Banner of Truth, 1989], 2).

Children must be able to understand that sin is an offense to God's holiness and that they are personally guilty (though because of their limited experiences, most kids obviously won't have as deep a sense of personal guilt as adults). There's nothing wrong with telling children about hell and God's wrath. Children do not have a difficult time grasping such concepts. They understand punishment for wrongdoing and are capable of understanding that Jesus died to take the punishment for the sins of others. They need to be told that Jesus expects to be obeyed, and they will understand even better than some adults that trusting Jesus means obeying Him. The importance of obedience needs to be emphasized repeatedly, even after the child makes a profession of faith.