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Best way for a nonprofit to record in-kind donations received then given away to a person or family.

Our nonprofit receives in-kind donations of things like clothing, furniture, school supplies, etc. that we then turn around and give away directly to an individual or family in need.

1.) I use the Sales Receipt/Product called "Donations-in-Kind"/Clearing Bank Account approach to record the incoming donation...but then what is the best way to record the act of giving the donated item away?

 

2.) Same question, but what if we're turning around and giving away the donated item to another charity?

 

Thanks,

Solved
Best answer 4 weeks ago

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Best way for a nonprofit to record in-kind donations received then given away to a person or family.

It's nice to see you here, @josiah1,

 

If you track the quantity on hand of the items you receive that you are donating or giving away, there are several steps you can follow to record it.

 

Here’s what you need to do:

  1. Click the + New icon and choose Sales Receipt for the item.
  2. In the Product/Service section, click the drop-down arrow to select the product/service you are donating.
  3. Change the Rate of the selected product/service to zero so that the total of the sales receipt is zero.
  4. At the bottom of the sales receipt, select Deposit To and choose your bank account. This will create a zero dollar transaction in your bank register that can be reconciled at any time.
  5. Click Save.

Next, to account for the original cost of the product/service, create a journal entry to move the cost out of the Cost of Goods Sold account and into the appropriate expense account (for example, Charitable Donations Expense).

 

To do this:

  1. Click the + New then Journal Entry.
  2. In the Account section, select the expense account used to track charitable contributions (for example, Charitable Donations Expense).
  3. Enter the cost of the product/service in the Debit field.
  4. On the next line, press the drop-down arrow and select the COGS account for the donation.
  5. The cost of the product/service entered in the field above will populate the Credit field.
  6. Click Save.

However, if these donations are recorded as fixed assets, you can follow the steps in this article to record them:  Set up and record in-kind donations

 

We always recommend seeking an accountant first to make sure you get the right advice on how to record certain donations. They are the best person to consult when you're unsure of any accounting process and accounts to use for it.

 

I'm also adding this related article about donations in QBO: How to record donations or charitable contributions

 

Let me know if you have any questions about this or need further help with the steps. I'll be right here to help you.

View solution in original post

1 Comment
Highlighted
Moderator

Best way for a nonprofit to record in-kind donations received then given away to a person or family.

It's nice to see you here, @josiah1,

 

If you track the quantity on hand of the items you receive that you are donating or giving away, there are several steps you can follow to record it.

 

Here’s what you need to do:

  1. Click the + New icon and choose Sales Receipt for the item.
  2. In the Product/Service section, click the drop-down arrow to select the product/service you are donating.
  3. Change the Rate of the selected product/service to zero so that the total of the sales receipt is zero.
  4. At the bottom of the sales receipt, select Deposit To and choose your bank account. This will create a zero dollar transaction in your bank register that can be reconciled at any time.
  5. Click Save.

Next, to account for the original cost of the product/service, create a journal entry to move the cost out of the Cost of Goods Sold account and into the appropriate expense account (for example, Charitable Donations Expense).

 

To do this:

  1. Click the + New then Journal Entry.
  2. In the Account section, select the expense account used to track charitable contributions (for example, Charitable Donations Expense).
  3. Enter the cost of the product/service in the Debit field.
  4. On the next line, press the drop-down arrow and select the COGS account for the donation.
  5. The cost of the product/service entered in the field above will populate the Credit field.
  6. Click Save.

However, if these donations are recorded as fixed assets, you can follow the steps in this article to record them:  Set up and record in-kind donations

 

We always recommend seeking an accountant first to make sure you get the right advice on how to record certain donations. They are the best person to consult when you're unsure of any accounting process and accounts to use for it.

 

I'm also adding this related article about donations in QBO: How to record donations or charitable contributions

 

Let me know if you have any questions about this or need further help with the steps. I'll be right here to help you.

View solution in original post

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