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

1. Go to All apps , select Accounting, then select Chart of accounts (Take me there).
2. Select New account.
3. Enter an Account name (for example, Donations).
4. From the Account type ▼ dropdown, select Income.
5. From the Detail type ▼ dropdown, select Non-Profit Income.
6. Select Save.

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

1. Go to All apps , select Sales & Get Paid, then select Products & services (Take me there).
2. Select New product/service ▼ dropdown, then select Non-stock item.
   Note: If you are creating a product/service for the first time, select Create items, then select Non-stock item from the Item type ▼ dropdown.
3. Enter a Name (for example, Donation).
4. From the Income account ▼ dropdown, 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)

Create a sales receipt for the donation:

1. Select + New or + Create.
2. Select Sales receipt.
3. Select Customise, then select your donation template (if you have one).
4. Complete the receipt details, including the donor and donation item.
5. Select the Payment method ▼ dropdown and select how you received the donation.
6. 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.
4. Fill out the necessary details, then select Save and close.

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. Sign in to your QuickBooks Online account.
2. Select + New or + Create.
3. Select Invoice.
4. Select your customer from the Add Customer ▼ dropdown.
5. Select the terms, invoice date, and due date.
6. Enter the invoice details, customer payment details, notes, and add attachments if you need to.
7. Select Save and close.

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

1. Go to All apps , select Accounting, then select Chart of accounts (Take me there).
2. Select New account.
3. Enter an Account name (for example, Charitable Contributions).
4. From the Account type ▼ dropdown, select Expenses.
5. From the Detail type ▼ dropdown, select Charitable Contributions.
6. Select Save.

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

1. Go to All apps , select Sales & Get Paid, then select Products & services (Take me there).
2. From the New product/service ▼ dropdown, select the type of product or service.
3. Enter a Name (for example, Charitable Contributions).
4. Select the I sell this service to my customers checkbox if you select Service.
   Notes:
   • If you select a Non-stock item, then select the I sell this to my customers checkbox. If you select an Stock item, the checkbox won't be available.
   • This checkbox is only available in QuickBooks Online Plus and QuickBooks Online Advanced.
5. From the Income account ▼ dropdown, select the Charitable Contributions account you created in Step 2.
6. Select Save and close.

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

1. Select + New or + Create.
2. Select Credit note.
3. From the Customer ▼ dropdown, select 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 All apps , select Customer Hub, then select Customers & leads (Take me there).
2. Select the customer you donated to.
3. On the Transaction List tab, confirm that the Invoice transaction you created at the beginning of the process has a Status of Paid.
4. Confirm that the Credit note transaction you created is noted as Applied in the Status column.
5. Confirm that a new Payment transaction is listed, with GBP £0.00 listed in the Amount column, and Closed noted in the Status column.