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 & gifts.

Part 1: Make accounts specifically for donations

  • Head to Accounting > Chart of Accounts > Add a New Account to get started on making new accounts for donations.
  • For recording the acceptance of donations, make the account type Income and name it 'Donations Received', or something similar. Click Save. 
  • Click Add a New Account again.
  • For recording the giving of donations, make the account type Operating Expense and name it 'Donations Given', or something similar. Click Save.

Now you have two accounts, one for accepting donations, and one for giving them!

 

Part 2: Categorize your transaction(s) to the new donations account(s)

To record the acceptance of a donation:

  • Head to Accounting > Transactions and either locate your bank-imported income transaction or add one by clicking Add an Income.
  • Make the Account whichever bank account this money is deposited into, e.g., Business Chequing. 
  • Make the Amount the total of the deposit, e.g., $100.00
  • Make the Category your new income account, e.g., Donations Received
  • Click Save.

To record the giving of a donation:

  • Head to Accounting > Transactions and either locate your bank-imported income transaction or add one by clicking Add an Expense.
  • Make the Account whichever bank account this money is withdrawn from, e.g., Business Chequing. 
  • Make the Amount the total of the withdrawal, e.g., $50.00
  • Make the Category your new expense account, e.g., Donations Given
  • Click Save.

 

What's next?

In terms of recording the donation acceptance/giving, you're all set! If you're wondering how these items affect your business' bottom line, you can see this in Reports > Profit & Loss, where all income and expenses are included, regardless of type. 

If you're curious about how this impacts your tax filings, this varies region to region. It will be best to consult with an accountant, as they'll be best equipped to inform you about how charitable donations are taxed, not taxed, or otherwise need to be recorded in your specific region. 

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