Do you know about - Non-Profit Organizations and In-Kind Contributions - Accounting
Organizations do not get cash donations only. Many times they get furniture, tool and other items that are valuable, but are not in form of cash, check or reputation cards funds. These types of donations are thought about to be in-kind contributions. If an item is expensive, for example ,000 and over, a formal estimation may be needed, not just for accounting purposes, but for taxes as well. Often sufficient donors help to pay for the appraisals because they want the deduction in their income tax returns.
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Donated in-kind contributions are booked as expenses and revenues. The journal entry is:
Debit tool expense-In-kind 3,000
Credit Donations- In-kind 3,000
Donated in-kind contributions can also be booked as a debit to assets, in the case of items that can be capitalized, regularly high-priced things. Depending on the assets, they can be depreciated. The journal entry then would be:
Debit Asset- In-kind 10,000
Credit Donations- In-kind 10,000
The other type of in-kind contribution is linked to donated services. Per accounting rules, only professional services can be recognized. For example, if volunteers work at special events as ushers and receptionists, their time is not recognized by accounting. However, if a physician provides services or a lawyer volunteer his time with professional services, then the time is accounted for using a reasonable hourly rate. For example, a Cpa may contribute high level accounting services for free and an hourly rate of 0 would be reasonable. If an lawyer provides legal services regularly billed at 0/hour, but charging the organization only / hour, the difference- 0- is thought about in-kind. The journal entry to book this contribution for 10 hours will be:
Debit Legal expenses - In-kind 1,700
Credit Donations- In-kind 1,700
In order to substantiate in-kind services, the professional could send the non-profit a note with his time spent. The organizations could send the professional a thank you note acknowledging his donated time. Note that services donated are not deductible in income tax returns.
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