Accounting for non-cash donations given

wplee · ‎March 09, 2020

How would the following be recorded in quickbooks:

1. A non-profit organization buys children's clothing at a store using a debit card, say for $100.00

2. This organization gives the clothing to a children's hospital, and provides them with an in-kind donation report listing the value of the donated clothing at $100.00

I've been struggling for a week trying to figure out the correct way to record this. From a strictly bookkeeping sense, it seems like I'm crediting the bank account where the debit card draws from, and debiting an asset account, say Distributable Goods, for step 1, when money flows out and goods come in. In step 2, I'm crediting the Distributable Goods asset account and debiting an expense account, say Non-cash awards, to account for the flow of goods out.

Do I create a "bill" for the store (and add the store as a vendor), even though there is no bill, as the transaction was paid for at the time of purchase? Do I create a bill for the hospital and treat them as a vendor also? That seems like it would cause the transaction to be recorded twice. I've seen posts that say to treat the grantee as a vendor and make the donation as a "payment" to them, and I've seen other posts that say to treat the grantee as a customer, create an invoice for them in the amount of the donation, and then somehow issue a credit memo that makes everything balance out. All very confusing :-(

Any help for a new user (and new to accounting in general) appreciated.

LeftBrainLogic · ‎March 10, 2020

You don't need to create a bill for the clothing store, what you described in step 1 would work great. At this point the clothes are sitting in the asset account.

For step 2, creating an invoice and then a credit seems like a lot of transactions to me when the only thing I really need is to know is the value of the donations to each grantee. To record the grant I would make the grantee a customer and then create a journal entry that credits the 'Distributable Goods' account and debits 'Non Cash Awards' just as you described, but I would also add the grantee to the name field of the expense line, just make sure 'billable' is not checked. This way I could do a quick report on the expense account giving me an easy list of all donations made.

View solution in original post

LeftBrainLogic · ‎March 12, 2020

I mentioned before that I would create a Customer record for my Grantee; however, a Vendor record more closely aligns with a Grantee as 'someone that you pay'. Sorry for that confusion.

Regarding Journal Entries not showing up in the Customer/Vendor center, the trick to have them appear is to make sure the Customer/Vendor is listed in the name field of the FIRST row of the Journal Entry. It is good to have the name included in all related rows of the Journal Entry, but having it in the FIRST row is required if you want the transaction to appear in the Customer/Vendor center. This also means you can only include one transaction per Journal Entry because if you added another transaction on lines 3 and 4 for another grantee, it would not show up in the Customer/Vendor center for them.

Here's a much longer post that reviews using Customers and Vendors for Charitable Organizations. Keep up the great work!

View solution in original post

LeftBrainLogic · ‎March 10, 2020

You don't need to create a bill for the clothing store, what you described in step 1 would work great. At this point the clothes are sitting in the asset account.

For step 2, creating an invoice and then a credit seems like a lot of transactions to me when the only thing I really need is to know is the value of the donations to each grantee. To record the grant I would make the grantee a customer and then create a journal entry that credits the 'Distributable Goods' account and debits 'Non Cash Awards' just as you described, but I would also add the grantee to the name field of the expense line, just make sure 'billable' is not checked. This way I could do a quick report on the expense account giving me an easy list of all donations made.

wplee · ‎March 11, 2020

That makes sense, I had a feeling I was overthinking it. Thank you very much!

LeftBrainLogic · ‎March 11, 2020

Also, I noticed your similar thread a bit ago about tracking all donations to grantees (both cash and non-cash) and I believe the detailed "QuickReport" on your Programs account would also work for you to track the individual transactions. Checks or bills for cash donations will be included in this report and will also include the name of your Grantee. I posted a couple transactions to a sample company and pulled this QuickReport:

wplee · ‎March 11, 2020

Yes, I did post something a while ago along a similar vein, trying to get a grasp on how these transactions should be recorded. I'm trying very hard to get this as correct as possible from the beginning, as even with my limited exposure to Quickbooks I can tell that trying to undo a year's or more worth of transactions because they were not set up correctly would take a lot of time and effort. Thanks very much for the follow-up post and example report.

One more question though...how do the transaction amounts get reflected back to the grantee in the Customer Center?

Your suggestion to use the journal entries to directly record the transactions was the clearest advise I've gotten, and I started to enter some transactions from a previous year as practice. I set up a grantee as a Customer (type Donor) and I assigned a job number to match the individual Distribution Number our organization used to track our grants made. I then entered the Customer:Job combination in the Name field of the journal entry (and made sure "billable" was not checked). I saved the entry, and viewed the Balance Sheet and P&L report just to see how everything looked. It looked correct.

However, if I go back to the Customer Center, the grantee shows no transactions and a balance of zero. Is this expected? I would have thought entering the Customer in the Journal Name field would have brought that transaction along to the Customer Center. Is there a way to get the transactions posted there?

wplee · ‎March 11, 2020

Thank you for posting the sample quick report, and also for your advise on using the journal to record the transactions. One thing I noticed though was the grantee showed no transactions in the Customer Center. The name shows up in the quick report, so I had thought it would have carried through to the Customer Center screen. It doesn't, I cannot see any transactions listed there, even after setting the correct date filter. I wonder if the reason for the invoice/credit memo dance is to get the customer data populated?

Catherine_B · ‎March 11, 2020

It's good to hear that recording Journal Entries works for your business preference, wplee.

The Journal Entry is a first customer basis in which it'll post on the customer we associated in the first line. We can enter two entries posting the second one to the other customer. Recording this I suggest reaching out to an accountant on how to post the affected accounts.

You can always get back to me if you need anything else. Thanks!

LeftBrainLogic · ‎March 12, 2020

I mentioned before that I would create a Customer record for my Grantee; however, a Vendor record more closely aligns with a Grantee as 'someone that you pay'. Sorry for that confusion.

Regarding Journal Entries not showing up in the Customer/Vendor center, the trick to have them appear is to make sure the Customer/Vendor is listed in the name field of the FIRST row of the Journal Entry. It is good to have the name included in all related rows of the Journal Entry, but having it in the FIRST row is required if you want the transaction to appear in the Customer/Vendor center. This also means you can only include one transaction per Journal Entry because if you added another transaction on lines 3 and 4 for another grantee, it would not show up in the Customer/Vendor center for them.

Here's a much longer post that reviews using Customers and Vendors for Charitable Organizations. Keep up the great work!

wplee · ‎March 15, 2020

Exactly what I was looking for - thank you! Your linked post is a must-read in my opinion for any non-profit getting started in Quickbooks. Sorry I can't give you more than one thumbs-up

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Accounting for non-cash donations given