How to Record Donations or Charitable Contributions in QuickBooks?

Although QuickBooks is the best accounting software solution for profit-centered businesses across the globe, for non-profit organizations to conduct a basic accounting function like registering and reporting charitable contributions can be quite difficult.

The content below will highlight the real meaning of charitable contributions and how you should account for them in QuickBooks minus any errors. Learn How to Record Donations or Charitable Contributions in QuickBooks?

What is a Charitable Contribution?

A charitable contribution is also called a charitable donation. It is a gift from any particular donor which is in the form of property or cash contribution. The main idea behind the contribution is to help non-profit institutions with a particular target or goal.

What Are Donations or Charitable Contributions in QuickBooks?

Another name for a charitable giving is a charitable contribution. It is a donation made by a giver in the form of money or goods. The contribution’s primary objective is to help the nonprofit organization meet a particular benchmark or goal.

These contributions may be made in the form of money, stocks, cheques, or even tangible items like apparel or equipment. For financial management, tracking donations in QuickBooks is essential since it enables organizations to keep precise records of all incoming funds, guaranteeing accountability and transparency.

Donations are essential to making the most use of your financial resources and providing effective support to your beneficiaries, whether they are used to fund particular projects, pay for operating costs, or contribute to charitable causes.

How to Record Donation or Charitable Contributions in QuickBooks Desktop?

Here are the steps to record charitable contributions in QuickBooks:

Step 1: Create an Invoice

To start recording a donation, you must prepare an invoice for the service or the product in order to record the income.

Make sure you do not miss out on this step. If you do so, the balances will not be in sync when you do the other important steps in the process.

Step 2: Make an Account for all kinds of Charitable Contributions

1. Navigate to Settings.
2. Choose Chart of Accounts.
3. Choose New.
4. In the particular Account dialog, choose Expenses from the particular drop-down list named Account Type.
5. Choose Charitable Contributions from the particular drop-down⬇️ list named Detail Type.
6. Add a Name for the particular account.
7. Press Save and Close.

Now, when the account is already created, the next move is to make a product/service item for contribution.

Step 3: Make a Charitable Contribution Service or Product Item

In order to make a service or product item for charitable contributions, you need to perform the steps given below:

1. Navigate to Settings.
2. In the Lists section, choose Products and Services.
3. Choose New.
4. In the given Service/Product information panel, choose the type of service or product.
5. Add a name for the item.
6. Choose the option that says I sell this product/service to my customers.
7. Choose the Charitable Contributions Account you built from the given drop-down⬇️ list in the particular Income Account field.
8. Choose Save and Close.

Note: When an account has been created along with a service/product item, the next move is to generate a credit memo for the exact value of the donation.

Step 4: Generate a Credit Memo

In order to generate a credit memo for the right value of the services or products you are donating, please follow the steps given below:

1. Choose +New.
2. In the Customers section, choose Credit Memo.
3. Add to choose the Customer that you have donated the Service or Product to.
4. In the particular Product/Service column, choose the Charitable Contributions item and add the Amount of your particular donation. Make sure the donation is entered as a positive number.
5. In the given Memo field, add Charitable Contribution or Donation.
6. Choose Save and Close.

Note: The credit memo shows the donation amount. The next move is to authenticate that it has been incorporated into the invoice you issued.

Step 5: Authenticate the Credit Memo was Incorporated to the Invoice

The last step in the method is to authenticate the credit memo that has been incorporated into the invoice you have built for the contributed items.

In order to authenticate that the credit memo has been rightfully integrated, please follow the steps below:

1. Navigate to Get Paid & Pay and choose Customers.
2. Choose the customers to whom you have donated the Service or Product from the given list.
3. On the particular Transaction List tab, please authenticate the Invoice Transaction you have built when the process commenced. Click the Status as Paid.
4. Authenticate the Credit Memo transaction that you have built is registered as Closed in the given Status column.
5. Authorize that a New Payment transaction is noted and is listed in the particular Total column. And in the Status column, Closed is noted.

Now, recording the charitable contributions is completed successfully.

How to Record Donation or Charitable Contributions in QuickBooks Online?

The amount of charitable contributions you make is entirely dependent upon the kind of donation you have made. In QuickBooks desktop, you have to create an invoice for non-cash charitable gifts. Next, utilize your Chart of Accounts to create an account that you will use to track charity contributions. Next, design a product to be donated. You must now provide a credit memo for the full amount of your donation.

To Generate an Invoice or Bill

1. Click the Customers menu, then choose the option to Generate Invoices.
2. Pick any customer or customer job from the list displayed.
3. You can click the Add New icon if the client or job is not yet on the list.
4. Add all the information that is required now.
5. Click on the “Save & Close” option.

To Create an Account that can be Used for Recording Donations

1. You must click on List menu, then select the Chart of Accounts from the dropdown.
2. Select the New tab by clicking the Account drop-down arrow located at the window’s bottom.
3. Click Continue after selecting Expenses as the Account Type. Provide the account a name.
4. Select Save & Close after that.

To Create a Donation’s Product/Service Item

1. Hover over List in the top menu bar, then select Item List.
2. Click the arrow next to Item, then click New.
3. Next, select the Inventory Part in the Type section.
4. Next, select the account you created from the drop-down list under the Income account field. Next, add the necessary information. Finally, click the OK tab.

To Grant a Credit Memo Equivalent to the Cost of the Goods You are Contributing

1. Select Customers, then select Create Credit Memos/Refunds.
2. Enter the details for the credit memo or refund.
3. Finally, press Save & Close.

Set up and Record In-kind Donations in QuickBooks Online

When you donate a service or an asset to an organization it is called in-kind donation. Such donations can include printing services, leased space, office supplies, or any type of professional services.

Steps to Create or Setup an In-kind Account

Enlisted below are the steps to set up and record in-kind donations in QuickBooks Online. Before you start following these steps, check with your accountant whether these are to be recorded as In-kind donations or not.

You can create clearing and income accounts in QuickBooks Online’s chart of accounts.

Step 1: Verify Whether or not you own an in-kind Donation Account

In order to avoid duplicate entries, make sure that you don’t have any in-kind donation account.

1. Select Chart of Accounts (Take me there) after going to Settings.
2. Put In-kind donations in the Filter by name or number field.
3. You can now create an account for in-kind donations if one does not already exist.

Note: Your chart of accounts is already set up if you see an account with the name “In-kind donations.”

Step 2: You must open an in-kind Donation Account

You can skip this step if you already have an in-kind donations account. However, those who do not have this account, can follow the steps provided blow:

1. Select Chart of Accounts from the Settings menu.
2. Choose New.
3. Donations in kind should be entered in the Account name field.
4. Choose Income from the Account type selection.
5. Choose Non-Profit Income from the dropdown menu under Detail type.
6. Click Save.

Step 3: You must also Create a Clearing Account

Establish a clearing account so you can monitor your in-kind contributions. This facilitates the recording of bill payments or sales receipts for your in-kind offerings.

1. Navigate to the Settings menu dropdown and choose the Chart of Accounts option.
2. Choose New.
3. In-kind Clearing should be entered in the Account name column.
4. Choose Bank from the Account type dropdown menu.
5. Choose Checking from the Detail type dropdown menu.
6. Enter the amount of the opening balance in the Opening balance area. Next, choose the date to begin in the Date column. (Note: A zero opening balance is possible.)
7. Click Save.

Step 4: Create a Service or Product item

Establish a clearing account so you can monitor your in-kind contributions. This facilitates the recording of bill payments or sales receipts for your in-kind offerings.

1. Select Chart of Accounts after going to Settings.
2. Choose New.
3. In-kind Clearing should be entered in the Account name column.
4. Choose Bank from the Account type dropdown menu.
5. Choose Checking from the Detail type dropdown menu.
6. Enter the amount of the opening balance in the Opening balance area. Next, choose the date to begin in the Date column.
7. Click Save.

Note: A zero opening balance is possible.

Steps to Record an In-kind Donations

Mentioned below are the steps to record an in-kind donation by creating a bill and a sales receipt, and later on you will have to mark it as cleared. In case you have received any fixed assets such as computers, vehicles, or land, use the fixed asset account on the bill. Also, ensure to talk to your accountant regarding the item being a fixed asset or not.

Step 1: Generate a Sales Receipt

1. Click Add New and choose Sales receipt.
2. Choose a customer from the Customer selection. (Note: Click + Add new if you haven’t already set up your customer.)
3. Put the contribution date in the Sales Receipt Date column.
4. Choose the bank account you created for In-kind clearing from the Deposit To dropdown menu.
5. Choose the in-kind donation item from the dropdown menu under Product/Service. Next, fill up the Description field with a description.
6. Enter the donation’s fair market value (FMV) in the Amount section.
7. Choose Close and Save.

Note: Speak with your accountant if you’re unsure about the donation’s fair market value.

Step 2: Generate a Bill

1. Click Add New and choose Bill.
2. Choose the donor’s name from the Vendor dropdown.

Note: Click + Add new if you haven’t already added your donor’s name to the vendor list.

1. Choose the in-kind contribution item from the Product/Service selection in the item details box.
2. Enter the donation’s fair market value (FMV) in the Amount section.
3. Choose Close and Save.

Note: Speak with your accountant if you’re unsure about the donation’s fair market value.

Step 3: You must Mark the Bill as Cleared

1. Click + New and choose Pay Bills.
2. Now you must click on the In-kind Clearing from the Payment account dropdown menu.
3. Check the box next to the bill you input.
4. Click “Save” and “Close” buttons.

Furthermore, during an audit, this piece of information can save a lot of time too.

Did you understand all about recording in-kind donations in QuickBooks? Make sure you make this change to your business on an early basis.

We have highlighted all the information related to recording charitable contributions in QuickBooks. If you still want professional guidance and help and want to know how the experts in the fields can do it, let us help you.

Accounting Professionals, CPA, Enterprises, Owners

Looking for a professional expert to get the right assistance for your problems? Here, we have a team of professional and experienced team members to fix your technical, functional, data transfer, installation, update, upgrade, or data migrations errors. We are here at Dancing Numbers available to assist you with all your queries. To fix these queries you can get in touch with us via a toll-free number
+1-800-596-0806 or chat with experts.

Frequently Asked Questions (Faqs)