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How to setup in-kind donations as the donor.

Forum|Forum|1 year ago
August 7, 2024
2 replies
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I recently closed a business and proceeded to donate some assets (that were treated as de minimis when acquired). Included were desks, chairs, printer, etc.

I have seen community questions about how to treat in-kind donations from the charities perspective but I can't make the leap as to how to do this as the donor. We have established the FMV of these items but am not sure how to record the FMV as part of an accounting transaction. Because of the de minimis approach, the original cost has already been expensed. Thanks!

QuickBooks Online

Best answer by Rainflurry

@BillM

If the donated goods have no asset value on your books because they were expensed at the time of purchase, then there's nothing you need to record. You cannot incur a donation expense for items that were already fully expensed. If you want to record the donation expense, you would need to offset the FMV of the donated items to income, thereby cancelling out the expense. So, there's no point in making an entry.

J

JanbonN

Thank you for sharing your journey of closing your business and your thoughtful decision to donate those assets, @BillM. It must have been quite a significant transition for you, and we admire your generosity. They’ll definitely make a positive impact on others in need.

Before proceeding with the steps of recording the donations, please note that if the amount you're writing off as a contribution will significantly affect your gross sales amount, I recommend consulting with your accountant before making this entry to ensure you’re following the best practices for your financial records and business structure.

To record the donations, the process requires creating an invoice, creating an account for charitable contributions, creating a product/service item called Charitable Contributions, issuing a credit memo for the customer, and verifying that the credit memo is applied to the invoice.

Let's begin by creating an account for the charitable contribution:

Go to the Gear icon and select Chart of accounts.
Click the New button (the green button located in the top right corner of the page).
Enter an Account Name. Charitable Contributions for example.
You can enter an account number if you want.
Choose Expenses for the Account type and Charitable Contributions for the Detail type.
Select Save.

Then, create a product/service item for charitable contributions:

Go to the Gear icon and select Products & services.
Select New and choose Non-inventory as the type of product or service in the Product/Service information panel.
Enter a Name for the item. Charitable Contributions for example.
Tick the I sell this product/service to my customers option checkbox.
Select the Charitable Contributions account you created from the dropdown list in the Income account field.
Fill in the necessary details.
Select Save and close.

After that, create an invoice and follow Steps 4 and 5 of this article to create a credit memo and verify if it's applied to the invoice: How to record donations or charitable contributions in QuickBooks Online.

Additionally, you can run reports to get a comprehensive overview of your business' finances.

Let us know if you have other concerns with recording your donations in QBO. We're here to help you in any way we can.

RainflurryAnswer

@BillM

If the donated goods have no asset value on your books because they were expensed at the time of purchase, then there's nothing you need to record. You cannot incur a donation expense for items that were already fully expensed. If you want to record the donation expense, you would need to offset the FMV of the donated items to income, thereby cancelling out the expense. So, there's no point in making an entry.

JessT

Hi Rainflurry!

Thank you for always sharing your inputs to help the OP with their concern. Have a good one!

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