How to account for donations
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How to account for donations
In addition to your business' usual income and expenses, you might also give or receive monetary donations. This article explains how to record both the giving and receiving of monetary donations &...
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It does not explain how to account for in-kind donations, which don't cost the business any cash, so the bank account is unchanged. An expense transaction has to have an Account and a Category for the expense to be attributed to. It cannot be business checking.
Hey there @Waxwing
Would you mind offering us a real world example of what type of in-kind donation you wish to record in your accounting app? This will just give us a bit more context as to what you're looking to show from the real world, and what benefits this has for your end of the year books. Thanks so much!
An example would be that an employee spends one day of their working week directly supporting a charity eg doing their bookeeping, rather than being directly involved in the business. The business' overall costs are likely to be higher as a consequence (unless of course they have some capacity headroom).
Hi there @Waxwing , thanks for getting back! Before I begin, I must disclaim that I'm not an accountant, and so can't officially offer advice as there could be implications on tax filings, so I must recommend that you speak to an accountant to be certain. That said, as I understand it, the accepted way to record in-kind donations is to set up a separate revenue account but the expense side of the transaction should be recorded in its functional expense account. For example, revenue would be recorded as Gifts In-Kind – Services, and the expense would be recorded as Professional Services. An accountant will be able to confirm for sure though!
For my example, I would like to donate my services to a client for an invoice that I had recurring for them. Invoice #620 is for $80 for a monthly service that I am donating/gifting to my client. How does a transaction such as this fit into these? I cannot figure out how to get it to work.
@JennR,
If you are here in the US, unfortunately the donation of services or time to a charity is not considered a charitable deduction. Since you are gifting services, I would delete the invoices.
Is it possible to send a receipt for a donation received?
Hey @EquipAbby , if this donation was received through an invoice, then you can send a receipt for the invoice although if you received a donation through other means I'm afraid we don't support issuing receipts for it.
How do I print a transaction report and also include the category that is listed under the description on the report? I am trying to do a year end report for my board and need the category to explain the description. I am a new user. Thank you for any help you can provide.
Hi...I am a new user to Wave and would love some help. I am trying to do a year-end report and also include the category (that is under the description) on the report to download as a csv file. I can't seem to figure out how to add this extra feature to my report. Any help would be wonderfully appreciated. Thank you.
Hey @1_Help_Needed !
By heading over to your Reports > Account Transactions (General Ledger) page, you can export your data in CSV or PDF format in the top right corner. I believe the report you are looking for is the PDF export that contains categories as well. I hope this helps.
Hi there, I an a treasurer for a small non profit. I would like to set up restricted funds for our donations, allowing us to designate an amount for a specific purpose, as requested by the donor. Is it possible to classify these in Wave? One idea I had was to set up another cash account for this purpose. For example, if we get a donation that must be used to buy widgets, then I would record the donation to a "Cash on Hand (widgets)" account. When we buy the widgets, I would record the transaction in the same account. I think this might work but it is a bit of a workaround, and is not true fund accounting. Is there a better way to do this?
Hey @BryceP , to truly account for this in Wave you would have to use a workaround as we don't support this at the moment. I do think however that the method that you proposed would work quite nicely.
Hello, I have a question about gifts in kind. I am a treasurer for a small non profit and we were selling some products as a fund raiser. The vendor who provided the product gave us an invoice of his costs for $200; however, he wanted to donate $50 of his costs to our non profit and only charged us $150. So I have an expense for a product and a donation in kind without the money $50 changing hands. He asked for a receipt for the $50 donation. I guess the question would be...how do I account for the $50 in kind donation without the money be exchanged back to us in the wave app? Please help..im clueless here
Hello @cpdhughzy !
In Wave, to record a donation, you will want to create a new income account through your Chart of Accounts page and name it something along the lines of "Donations Received". You can learn more about this here. Now, if your vendor wants a receipt for the $50.00 donation, Wave doesn't support such receipts. The best way to go about this is to have your vendor include the donation on the bill you received as a deduction from the bill's total so they have a record of it.
When recording this in Wave, you'll have three options:
Option 1: Record a $200.00 expense transaction and a separate $50.00 income transaction with the new "Donations Received" category selected
Option 2: Simply record a $150.00 expense. With this option, no donation will be recorded.
Option 3: If you created a bill in Wave, you can can include the donation by entering it as a separate discount/deduction item line. To do this, be sure to add a "-" in front of the discount amount to reduce the bills total like so: -$50.00.
Please note, I am not an accountant so I'm not familiar with the potential tax implications that are associated with each option. To ensure you get the best advice, I suggest reaching out to a CPA.
I hope this helps!
I need to be able to issue year end statements to our donors. Is there a way in wave to do this?
Hello @Anne_2102 !
If your donors have customer profiles, you can generate Customer Statements. Alternatively, if your customers are linked to transactions, you can create an Accounting Transactions (General Ledger) report and filter for the customer(s) in question.
Easiest workaround we use for charitable donations given so that it does NOT appear as an operating expense. As charitable donations are not considered operating expenses when filing a T2 for incorporation. This workaround does not impact your Profit-Loss Report so your income and expenses are accurate. Charitable Donations total would be visible on the Balance Sheet report under Details.
INSTRUCTIONS
First create the charitable donations given category:
Go to "Accounting" >> "Chart of Accounts" >> "Assets" >> Under "Cash and Bank" select "Add a new account" >> Label new account "Charitable Donations Given".
Next, record the donation given transaction:
Go to "Accounting" >> "Transactions" >> Select "Add expense" >> Enter details, select the account the donation was paid from (i.e. Bank) and for the category select "Transfer to bank, credit card or loan" then select "Charitable Donations given" category you've already created. Wave will then make a created transfer showing the transfer IN to the Charitable Donations account, you can make sure the date and description is satisfactory.
DONE
Now your charitable donations given total will be visible in a Balance Sheet report when you select "Show Details". The "Total Assets" will still show the combined total of your donations given and your cash and bank which is your accurate total.