When you make donations or charitable contributions, how you record them depends on the type of donation you've made. Recording a cash donation is different from recording the donation of products or services that you normally sell.
The following sections will guide you through the steps needed to record either type of donation.
In this article, you'll learn how to:
- Donate cash
- Donate products or services you usually sell
- Create an invoice
- Create an account for charitable contributions
- Create a Charitable Contributions product/service item
- Issue a credit memo
- Verify the credit memo was applied to the invoice
To donate cash, you can set up the charitable organization you're donating to as a supplier so that, when you make a donation, you can record it as a cheque or a bill and payment, just as you would for any other payment to a supplier.
Make sure that the expense account you select from the Category dropdown list in the Category details section is a dedicated expense account for tax-deductible contributions that isn't used for any other expenses, as this will make things easier for your accountant or tax preparer.
If you don't already have an expense account for donations, you can select + Add new from the dropdown list in the Category column to add one when you record the donation.
Donation of products or services you usually sell
|Note If the amount you're writing off as a contribution will significantly affect your gross sales amount, consult your accountant before making this entry.
To record a product and services donation, you'll need to follow these steps in this order, which we'll walk you through below:
- Create an invoice for the products or services you donated.
- Create an account for charitable contributions.
- Create a product/service item called Charitable Contributions.
- Issue a credit memo to the customer.
- Verify the credit memo was applied to the invoice.
The following sections will guide you through this process.
Step 1: Create an invoice
To begin to record a donation, you must create an invoice for the product or service so that you can record the income.
Don't skip this step or your balances will be off after you perform the other steps in the process.
Note: To create a product or service for this purpose, see Step 3: Create a Charitable Contributions product/service item.
Step 2: Create an account for charitable contributions
To create an account to use to record charitable contributions:
- Go to Settings ⚙, then Chart of accounts (Take me there).
- Select New.
- In the Account dialog, select Expenses from the Account Type dropdown list.
- Select Charitable Contributions from the Detail Type dropdown list.
- Enter a Name for the account (for example, Charitable Contributions).
- Select Save and Close.
Once you have created this account, the next step is to create a product/service item for donations.
Step 3: Create a Charitable Contributions product/service item
To create a product/service item for charitable contributions:
- Go to Settings , then Products & services (Take me there).
- Select New.
- In the Product/Service information panel, select the type of product or service.
- Enter a Name for the item (for example, Charitable Contributions).
- Select the I sell this product/service to my customers option checkbox.
- Select the Charitable Contributions account you created from the dropdown list in the Income account field.
- Select Save and close.
Now that you have created an account and a product/service item, the next step is to issue a credit memo for the value of your donation.
Step 4: Issue a credit memo
To issue a credit memo for the value of the products or services you're donating:
- Select + New.
- Under Customers, select Credit memo.
- Enter or select the Customer you donated the product or service to.
- In the Product/Service column, select the Charitable Contributions item and enter the Amount of your donation as a positive number.
- In the Description field, enter Donation or Charitable Contribution.
- Select Save and close.
The credit memo reflects the amount of your donation. The next step is to verify that it has been applied to the invoice you created.
Step 5: Verify the credit memo was applied to the invoice
The final step in the process is to verify that the credit memo you created has been applied to the invoice you created for the donated items.
To verify that the credit memo has been properly applied:
- Go to Sales, then Customers (Take me there).
- Select the customer you donated the product or service to from the list.
- On the Transaction List tab, confirm that the Invoice transaction you created at the beginning of the process has a Status of Paid.
- Confirm that the Credit memo transaction you created is noted as Closed in the Status column.
- Confirm that a new Payment transaction is listed, with CA $0.00 listed in the Total column, and Closed noted in the Status column.
The donation has now been correctly recorded.