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?
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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.
How to Record Charitable Contributions in QuickBooks?
Here are the steps to record charitable contributions in QuickBooks:
Step 1: Make 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
Step 1: Navigate to Settings.
Step 2: Choose Chart of Accounts.
Step 3: Choose New.
Step 4: In the particular Account dialog, choose Expenses from the particular drop-down list named Account Type.
Step 5: Choose Charitable Contributions from the particular drop-down⬇️ list named Detail Type.
Step 6: Add a Name for the particular account.
Step 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:
Step 1: Navigate to Settings.
Step 2: In the Lists section, choose Products and Services.
Step 3: Choose New.
Step 4: In the given Service/Product information panel, choose the type of service or product.
Step 5: Add a name for the item.
Step 6: Choose the option that says I sell this product/service to my customers.
Step 7: Choose the Charitable Contributions Account you built from the given drop-down⬇️ list in the particular Income Account field.
Step 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:
Step 1: Choose +New.
Step 2: In the Customers section, choose Credit Memo.
Step 3: Add to choose the Customer that you have donated the Service or Product to.
Step 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.
Step 5: In the given Memo field, add Charitable Contribution or Donation.
Step 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:
Step 1: Navigate to Get Paid & Pay and choose Customers.
Step 2: Choose the customers to whom you have donated the Service or Product from the given list.
Step 3: On the particular Transaction List tab, please authenticate the Invoice Transaction you have built when the process commenced. Click the Status as Paid.
Step 4: Authenticate the Credit Memo transaction that you have built is registered as Closed in the given Status column.
Step 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.
Note: QuickBooks has the ability to monitor donations like a check, cash, credit cards, etc. Such revenues must be added as donations to make sure the right tax fields are utilized for the particular year-end deductions. Rather than adding a donation as a deposit, it is highly recommended to build a sales receipt form to build more tracking options like the charitable contribution, donation source, or the program.
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.
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Frequently Asked Questions (Faqs)
How a Charitable Contribution is different from a Charitable Donation?
In simple terms, charitable donation and charitable contribution are not the same. A charitable contribution is related to a gift to a collection or a common fund while a donation is usually related to a gift to a particular non-profit organization. In the real world, these two phrases are often understood as the same phrase.
How to Record a Donation Refund in QuickBooks?
Here are the steps to record a donation refund in QuickBooks:
Step 1: Press on Customers.
Step 2: Press on Create Credit Memo or Credit Refund.
Step 3: Now, the particular Refund icon will be displayed.
Step 4: Choose the bank account.
Step 5: In the particular Pay to order section, press the customer.
Step 6: Enter the amount that is required to be donated.
Step 7: Now, press Save.
How is it Possible to know the Amount of Donation in QuickBooks?
It is possible to know the amount of donation in QuickBooks with the help of a credit memo. The credit memo displays the donation amount clearly.