A dedicated income account helps you track donations separately from other business income.

1. Go to Settings ⚙, then Chart of accounts.
2. Select New.
3. For Account Type, select Income.
4. For Detail Type, select Non-Profit Income.
5. Enter an Account Name (e.g., "Donations").
6. Select Save and Close.

Create a non-stock item to represent donations on sales receipts.

1. Go to Sales, then Products & services.
2. Select New, then Non-stock.
3. Enter a Name (e.g., "Donation").
4. For an Income account, select the account you created in Step 1.
5. Select Save and close.

To record donations correctly, add your donor as a customer in QuickBooks Online. This ensures all donations are linked to the right person or organisation.

Depending on how you receive the donation, record it as either a sales receipt or a bank deposit.

Option 1: As a sales receipt (for immediate donations)

As a sales receipt (for immediate donations):

1. Create a sales receipt for the donation.
2. Select Customise, then choose your donation template (if you have one).
3. Complete the receipt details, including the donor and donation item.
4. Select the Payment method ▼ dropdown and choose how you received the donation.
5. Select Save and close or Save and send to email the donor a receipt.

Option 2: As a bank deposit (if no sales receipt is needed)

Use a bank deposit if donations are received without a receipt.

1. Create a bank deposit for the donation.
2. Make sure to select the donor and the revenue account you set up for donations.

To record a cash donation:

1. Set up the charitable organisation as a supplier in QuickBooks Online.
2. Record the donation as a cheque or bill payment to the supplier.
3. In the Category details section, select a dedicated expense account for tax-deductible contributions.

Tip! Using a separate expense account for donations makes tax reporting easier and ensures your books remain accurate.

To record the income associated with the donation:

1. Create an invoice for the donated product or service.
2. Ensure the invoice reflects the full value of the donated item.

A separate expense account is needed to track donations separately from other business expenses.

1. Go to Settings ⚙, then select Chart of accounts.
2. Select New.
3. In the Account Type dropdown, select Expenses.
4. In the Detail Type dropdown, select Charitable Contributions.
5. Enter a Name (e.g., "Charitable Contributions").
6. Select Save and Close.

A product/service item is required to apply the donation amount correctly.

1. Go to Sales, then select Products & services.
2. Click New.
3. Select the Type (product or service).
4. Enter a Name (e.g., "Charitable Contributions").
5. Tick I sell this product/service to my customers.
6. In the Income account dropdown, select the Charitable Contributions account you created in Step 2.

Click Save and Close.

A credit note offsets the invoice for the donated items, ensuring your records are accurate.

1. Click + New.
2. Under Customers, select Credit note.
3. Enter the Customer you donated to.
4. In the Product/Service column, select Charitable Contributions.
5. Enter the Amount as a positive number.
6. In the Description field, enter "Donation" or "Charitable Contribution".
7. Select Save and Close.

To ensure the credit note has been properly applied to the invoice:

1. Go to Sales, then select Customers.
2. Select the Customer you donated to.
3. On the Transaction List tab:
   Confirm the Invoice you created is marked Paid.
   Ensure the Credit note is marked Closed.
   Check for a Payment transaction showing GBP £0.00 and a Status of Closed.