501c3 Donations

Donations

Donations

We are 501c3 organization that collects non monetary donations from businesses and individuals for items to be raffled off at our fund raising events.

If we give a receipt for the non monetary item indicating the worth which is the retail price, ie $25.00 and sell $10.00 worth of raffle tickets, there is a difference of $15.00.

The donor's receipt will show $25.00 but our bookkeeping will only show $10.00 of income. How do we do the bookkeeping?

Also, some of the donations are given out as door prizes with no charge for the ticket. Thanks for your help.

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Oct 10, 2023
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starstarstarstarstar 		Non-Monetary Donations
by: BB

When you're dealing with a 501(c)(3) organization and non-monetary donations, it's crucial to have precise bookkeeping to maintain transparency and comply with accounting standards.

Handling Non-Monetary Donations
1. **In-Kind Donation Account**: When you receive a non-monetary item, you should record it as an "In-Kind Donation." For instance, if you receive an item worth $25, you will credit an "In-Kind Donation" account and debit an "Asset" account for $25. This way, you're recognizing the fair market value of the donation.

2. **Receipts for Donors**: Provide a receipt to the donor indicating the fair market value, which in this case is $25. Note that it is up to the donor to substantiate this value for tax purposes.

Handling Raffle Tickets
1. **Raffle Revenue**: If you sell $10 worth of raffle tickets for the item, you will credit a "Raffle Revenue" account and debit a "Cash" account for $10.

Handling the $15 Difference
1. **Expensing the Item**: When the item is eventually given out, either in a raffle or as a door prize, you would debit the "In-Kind Donation" account and credit the "Asset" account for $25, essentially removing the item from your books.

2. **Account for the Gap**: There's no need to adjust the initial $25 value down to $10. Both are separate transactions: one is a donation (worth $25), and the other is revenue (worth $10).

Door Prizes
1. **Expensing Door Prizes**: If items are given as door prizes, you would treat this in the same way as raffle items—debit the "In-Kind Donation" account and credit the "Asset" account for the fair market value of the item.

The main thing is to differentiate between donations received and revenue generated from those donations. Keeping these separate will help ensure your financial records are accurate and compliant.

I hope this clears up your queries on how to handle non-monetary donations and raffle tickets in your 501(c)(3) organization. Feel free to ask if you have more questions!

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Donations Received Bookkeeping Question

Donations Received

Donations Received

Is a donation received considered an asset?


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Jul 01, 2018
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starstarstarstarstar 		Donation Received Bookkeeping Answer
by: Stephanie

Thank you for you bookkeeping question about whether or not donations received are considered an asset.

Depending up what type of donation you receive, you would journal the exchange in different ways but in each instance the donation received would typically be considered an asset such as with Cash, Equipment and Inventory donations.

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Donated Business Services

by Nancy
(Yuba-Sutter, CA)

I just began doing the books for a service company and found 2 donated services receipts for a little over 10k that was made to a church. I am not sure how to book this into the g/l. Shall I create an in-kind revenue account and post the other side to an in-kind expense to zero? Thank you.

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Oct 10, 2023
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starstarstarstarstar 		In-Kind Donations
by: BB

When dealing with donated services to a non-profit entity like a church, it's important to account for these transactions accurately in the General Ledger (G/L) to maintain a clear financial picture.

Steps to Book Donated Services:

1. **Create In-Kind Revenue Account**: First, you'd set up an account in your G/L called "In-Kind Donations Revenue" or something similar. This account will reflect the value of services donated to the church. Credit this account with the total value of the donated services, which in your case is a little over $10k.

2. **Create In-Kind Expense Account**: You'll also need another account called "In-Kind Donations Expense" or a similar name. This will be the account where the "cost" of providing these services will be accounted for. Debit this account with the same amount as credited to the In-Kind Revenue Account.

By doing so, the two entries offset each other, making it a zero-net transaction from an income and expense perspective but still accurately reflecting the charitable activity.

Journal Entry Example:
Debit: In-Kind Donations Expense $10,000
Credit: In-Kind Donations Revenue $10,000

This method allows you to accurately record the value of the services donated, ensuring both revenue and expense sides are properly accounted for, while maintaining compliance with accounting principles.

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Donated Equipment

by Kathy
(Hollister, CA)

How to do a Journal entry for equipment that is donated and was paid for from another budget unit? The budget unit that donated it was a government fund to a proprietary fund.

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Oct 10, 2023
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starstarstarstarstar 		Interfund Transfers
by: BB

When equipment is donated from one budget unit (such as a government fund) to another (like a proprietary fund), specific journal entries are needed to properly account for the transaction on both sides.

For the Government Fund (Donor Budget Unit):

1. **Debit an Expense Account**: Since the equipment is leaving the government fund, you would debit an "Interfund Transfers Out" or "Donated Equipment Expense" account for the fair market value of the equipment.

2. **Credit the Asset Account**: You would then credit the Equipment Asset account to remove it from this unit's balance sheet.

Journal Entry in Government Fund:

Debit: Interfund Transfers Out (Fair Market Value)

Credit: Equipment Asset (Fair Market Value)

For the Proprietary Fund (Recipient Budget Unit):

1. **Debit the Asset Account**: The proprietary fund receives the equipment, so you'd debit an Equipment Asset account for the fair market value of the equipment.

2. **Credit a Revenue Account**: You would credit an "Interfund Transfers In" or "Donated Equipment Revenue" account.


Journal Entry in Proprietary Fund:

Debit: Equipment Asset (Fair Market Value)
Credit: Interfund Transfers in Fair Market Value)

By doing this, both the donor and recipient budget units will have accurate records that reflect the transaction. Always remember to consult with your financial advisor or auditor to ensure you are in compliance with the specific governmental accounting standards that may apply to you.

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Donation Recieved as Goods

by Riya
(Singapore)

What is the double entry for donation received as goods from supplier?

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Oct 10, 2023
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starstarstarstarstar 		Double Entry Donation Received
by: BB

When you receive a donation in the form of goods from a supplier, the accounting treatment involves recognizing both the income (revenue) and the asset (inventory or fixed asset, depending on the nature of the goods). Here's how to do the double entry:

For Donated Goods Meant for Resale (Inventory):

1. **Debit the Inventory Account**: Debit the Inventory account for the fair market value of the goods received.

2. **Credit a Revenue Account**: Credit a "Donation Revenue" or similar income account for the same amount.


Journal Entry:
Debit: Inventory (Fair Market Value)
Credit: Donation Revenue (Fair Market Value)

For Donated Fixed Assets (e.g., Equipment):

1. **Debit the Fixed Asset Account**: Debit a Fixed Asset account for the fair market value of the asset.

2. **Credit a Revenue Account**: Credit a "Donation Revenue" or similar income account for the same amount.

Journal Entry:
Debit: Fixed Asset (e.g., Equipment) (Fair Market Value)

Credit: Donation Revenue (Fair Market Value)

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*Hashtags: #AccountingBasics, #DoubleEntry, #DonationReceived, #GoodsDonation, #FairMarketValue, #InventoryManagement, #RevenueRecognition, #NonCashDonations, #AccountingForDonations, #FinancialReporting*

Always consult your financial advisor or auditor to ensure you are in compliance with the relevant accounting standards and regulations for your jurisdiction.

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How to Record Service Donations?

Hi, I am starting up my own fitness studio and I was wondering how I record donations of monthly passes or 10 visit punch passes?

I donate these items for both community and charitable events related to fundraising which I would think would be eligible for a donation receipt? I read that the way to record it for bookkeeping is to credit income and debit expense; is this correct?

Also, I donate some of these items for promotional purposes, so would this be advertising?

I did some searching online and saw that there is a different treatment for donations of property versus services, so I am unsure of how to deal with the donation of these passes which are a service.

Any help would be greatly appreciated!

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Oct 10, 2023
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starstarstarstarstar 		Fitness Studio Donations
by: BB

Starting a fitness studio is exciting, and giving back to the community through donations is a great way to get involved. Here's how to handle the accounting for donated monthly passes or 10-visit punch passes:

Donations for Charitable and Community Events:

1. **Credit Income Account**: You would credit an income account such as "Donation Revenue" for the retail value of the donated pass.

2. **Debit Expense Account**: Simultaneously, you would debit an expense account, such as "Charitable Donations" for the same amount.

Journal Entry:
Debit: Charitable Donations $X (Retail Value)
Credit: Donation Revenue $X (Retail Value)

This way, your income and expenses offset each other, and your net income remains unaffected. Consult your tax advisor regarding eligibility for donation receipts.

Donations for Promotional Purposes:

1. **Credit Income Account**: Credit "Donation Revenue" or "Sales Revenue" for the retail value of the pass.

2. **Debit Expense Account**: Debit "Advertising and Promotion" for the same retail value.

Journal Entry:
Debit: Advertising and Promotion (Retail Value)
Credit: Sales Revenue (Retail Value)

Donated services are different from donated property. Generally, accounting rules require you to recognize income and expenses only when an actual cash transaction occurs. However, donated services, if material and measurable, may still warrant recording in the books.

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