Accounting for Donations

car donatedQ: An organization recently got a donation of a Motor Vehicle purchased for $40,000. How does the receiving organization account for it?


A: I would do the journal entry for this as follows:

Debit Motor vehicle $40,000
Credit Donation received $40,000


The debit is the easy part here: the business is receiving an asset, assets occur and increase on the left side so we credit it.

The credit described what occurred - we received a donation. This "donation received" account is actually an income account. Income occurs naturally on the right side as it means more for the owner (owner's equity) and therefore it's credited.

Since a donation is not usually the main or a regular source of income for a business, donations received would normally fall under "other income" in the income statement / profit and loss statement.

Hope that helps.

- Michael Celender

Comments for Accounting for Donations

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Why?
by: Anonymous

Why do you credit cash yet it is a donation?

There was no cash received in this transaction. The donation came in the form of the motor vehicle, not in the form of cash. The motor vehicle is debited.

- Michael Celender

DONATION ENTRY
by: FAIZU RAHMAN.K.P

WE WILL TREAT THIS TRANSACTION AS BELOW:
MOTOR VEHICLE A/C DEBIT
CASH A/C CREDIT.
BECOZ WE WIL GIVE A NOMINAL VALUE FOR THIS TRANSACTION SAY FOR RS.1, OR RS.10 ONLY/-.
WE HAVE TO SHOW THIS FIXED ASSET IN OUR BOOKS OF ACCOUNT... THAT IS WHY WE SHOW THIS TRANSACTION LIKE THIS

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