In-kind contributions represent services or assets (other than cash) that have been donated to an organisation. For example, an in-kind donation might be printing services, office supplies, furniture, leased space, or professional services.
Before you can record an in-kind donation, you must set up an income account and clearing account for in-kind charitable contributions, and create a product or service item for the donations. You can then record the in-kind donation by creating a sales receipt and bill using the Fair Market Value (FMV) of the donation as the amount, and then clearing the bill.
|Note:Check with your accountant to find out whether a donation should be recorded in your books as an in-kind donation, and consult with them if you are unsure of what the Fair Market Value of a donation is.|
The steps in the following sections provide detailed guidance through each part of this process.
Before you enter an in-kind donation, you should set up the income account and clearing account and the product/service item needed to record the donation.
The following sections can help guide you through this process.
The first step in setting up an in-kind donation is to create an income account to track contributions.
The account is created. The next step in the process is to create a clearing account.
The next step in setting up the ability to record in-kind donations is to set up a clearing account for such donations.
The account is created. The next step is to create a new product or service item for each donation.
To properly record in-kind donations, you must create a product/service item for each donation.
Once the accounts are set up and the product or service item is created, you can begin to record in-kind donations.
When you record an in-kind donation, you must enter a sales receipt and create a bill for the donation, then mark the bill as cleared.
|Note If you receive fixed assets (for example, vehicles, computers, or land) as an in-kind donation, use an expense or a fixed asset account on the bill. If you're not sure whether an item is a fixed asset, consult your accountant.|
The first step in recording an in-kind donation is to enter a sales receipt for the donation, using the Fair Market Value (FMV) of the donation as the amount.
|Note Consult your accountant if you are unsure of the Fair Market Value of a donation.|
The sales receipt is created. The next step int he process is to create a bill for the donation.
Once you have entered a sales receipt for the donation, create a bill for it.
Now that the bill has been created, the next step is to clear the bill.
The last step in recording an in-kind donation is to mark the bill you created as cleared.
The In-Kind Clearing account now has a zero balance and the donation is recorded.