Questions: Accounting for Donations
Q: 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 (asset) $40,000
Credit Donation received (income) $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 debit it.
The contra entry, the credit, described what occurred - we received a donation.
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).
Hope that helps. See below for more questions and answers about donations, including for non-profits.
- Michael Celender
Accounting Basics for Students
Tutorials relating to this Topic:
Return from Questions about Donations to Full Accounting Questions and Answers
Comments for Questions: Accounting for Donations
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Closing Entries for a Non-Profit
(Donating Remaining Items)
by Amy Hood
(Northbrook, Canada)
Q: I am trying to close accounts for a non-profit company. They have remaining t-shirts and food that they are donating to another charity (homeless shelters). How do I post closing entries?
A: I would record this as follows:
Dr Donation (expense)
Cr T-shirts/food (asset)
That way you are recording the assets you're giving away as a loss or expense.
Michael C.
Accounting Basics for Students
Comments for Closing Entries for a Non-Profit
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Recording of Inventories Donated
Q: How do we record inventories when donated in the periodic inventory method?
Comments for Recording of Inventories Donated
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