How to record the Asset received in donation?
Create new fixed asset under
Fixed Assets tab.
Then record journal entry where you credit
Donations received income account and debit
Fixed assets asset account. The amount you enter should represent value of fixed asset donated.
Thank you Buddy Lubos. so nice of you.
I see that my “Donations in Kind” shows as Income on my Income report. Surely this is not right, because this was not “Income” but Furniture received as donation. I Debited “Furniture” in the Assets group, and Credited Donations in kind in the Income group. This seems wrong somehow.
Please advise what is correct in terms of GAAP.
From accounting point of view, donations are income. Why does it seem wrong? Just because something is income, it doesn’t mean you will need to pay income tax on it but that’s up your accountant to determine.
It was just the fact that it shows a large profit while cash revenue was actually minimal. However, it makes perfect sense that it should be recorded as income, since I would have had to buy the goods if it was cash. Thanks for your help and prompt response.
Dear Lubos and DerekPrins, then how can we manage the large amount of profit, which is effect of donation in kind. plz help
What do you mean by manage ? Why is the large amount of profit an issue ?
A question is, who made the Donation in Kind - a member of the organisation or a non-member (public)? If by a non-member and the donation was being kept (not sold) and wanted to be recorded in the accounts as an asset of the organisation then a journal as above.
If by a member of the organisation then you “could” take it up as Equity - Contributions (capital), as the organisation would have needed members cash (capital) to purchase that same asset.
E.g. - if an organisations stakeholder (sole trader. partner, shareholder, member) transfers private assets into the organisation then that would be a contribution of capital not income.
If the Donation in Kind is going to be sold (via a shop) then on receipt you would do nothing as the income would arise when it is sold.
Thanks for your concern Brucanna,
Q: Who made the donation in kind?
A: a non-member and its not going to sale.
it is recorded as above but i am thinking in this closing organization profit is toooooo high because of this entry in the next financial year it will be on floor is there any way to manage that profit ratio?
my point is that i want profit ratio of next financial year should be at reasonable stage. now what should i do?
If you want the asset on the books but for what some reason you don’t want to reflect the associated profit then you could either lower the valuation assuming that its second hand furniture or depreciate it by 100% in the current year
If you did not want to be in this situation, you should not have accepted the in-kind donation. The purpose of accounting software is to correctly reflect your position and performance, not cover it up.