FIrst, I am not a non-profit. I am writing to ask about funds we wish to donate, not incoming donations. I understand making cash donations to charity, in-kind gifts, and even having a customer ask to make a donation during a POS transaction, but I'm having a hard time wrapping my head around this.
We have a program called Give Ten, wherein ten percent of the sale of certain items is donated to charity. Last year, at the end of each month I calculated how much that amount was based on sales and then wrote a check for that amount using the Contributions to Charities expense account. Easy peasy.
This year, rather than donating at the end of the month, I want to track that amount so we can make the donation later. I assume I need a clearing account, but I'm not sure how to work it. If I setup, for example, an Earmarked for Charity liability account, what are my journal entries when (a) I want to track the funds raised at the end of a month, and (b) I finally write a check to make a donation?
Last year, if I wrote a check to a charity it would be a debit to Contributions to Charities and credit to Cash, so it seems like, with the clearing account in between, it would be first debit Contributions to Charities and credit Earmarked for Charity, and second debit Earmarked for Charity and credit Cash. But then that's entering that I made a donation before I made a donation, right? That feels wrong.
Clearly I'm not an accountant. What am I missing here?
