QuickBooks is one of the well-known accounting solutions mainly developed for small and medium-sized businesses to maintain employee payroll functions, manage and pay bills. To perform standard accounting functions such as reporting and recording charitable contributions, it can be challenging for nonprofits. This article will walk you through the process of setting up and recording in-kind donations in QuickBooks Online.
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What is an in-kind Donations?
An in-kind donation is one that includes a good or service in addition to cash. It will include furniture, rented space, office supplies, printing services, and other professional services. QuickBooks gives you the option to report the in-kind donation if you choose to.
Note: If you are unsure of the Fair Market Value of a donation or want to know if it should be recorded in your books as an in-kind donation, check your accountant.
How to Set up in-kind Donations in QuickBooks Online
You must create a product or service item and an income and clearing account for charitable contributions in order to record an in-kind donation.
Step 1: Look that You Already Have an in-kind Donations Account
Check to see whether you already have a non-profit account for tracking in-kind donations in order to avoid creating duplicates.
- Chart of Accounts can be found by going to Settings.
- Look for In-kind donations in the Filter by name field.
- Your chart of accounts is ready if you find an account called In-kind donations. No need to open an account for in-kind donations. Step 3 can be skipped.
Step 2: Create an in-kind Donations Account
- Select Chart of Accounts by going to Settings and then you have to select New. Note: You must switch to accountant view if the Account window appears instead of the new category window.
- Select Income or Revenue from the Account Type dropdown menu from the Account dialog.
- Then you have to select Non-Profit Income from the Detail Type dropdown menu.
- Enter In-kind donations in the name field.
- Lastly, you have to select Save and then Close.
Step 3: Create a Clearing Account
- Select Chart of Accounts by going to settings.
- Then you have to click on New. You will see a window labeled either Account or new category but it depends on your account.
Create a Clearing Account in the Account Window
- You have to select Bank, from the Account type dropdown menu.
- Then select checking from the Detail Type dropdown menu.
- For the account, enter a name such as In-Kind Clearing.
- For the account, select a starting date and opening balance. Opening balance can be $0.
- Lastly, after finishing you have to select Save and Close.
In the New Category Window Create a Clearing Account
- In the category name field, you have to enter a name such as In-Kind Clearing for the account.
- Now you have to select Bank and credit cards from the Select category and then you have to choose Select.
- Then you have to select Checking from the Account Type dropdown menu.
- After that, in the starting date and opening balance you have to select a starting date and opening balance for the account. Opening balance can be $0.
- After finishing you have to select Save.
Step 4: Create a Product or Service Item
- First, You have to select Products and services by going to Settings.
- Then you have to select New and then click on Service.
- Add a Name and Description that is suitable for sales, pledge, or donation receipts in the product/service information panel.
- After that, You have to select the In-kind donations income account that you have created from the Income account.
- Select the I purchase this product/service from a vendor checkbox under the purchasing information.
- Lastly, You have to select Save and Close.
You can start to record in-kind donations after your account is set up and the product or service item is created.
How to Record in-kind Donations in QuickBooks Online
Enter a sales receipt and create a bill for the donation, when you record an in-kind donation, and then mark the bill as cleared.
Note: Use an expense or fixed asset account on the invoice if you receive fixed assets (such vehicles, computers, or real estate) as a gift in kind. Consult your accountant if you’re unsure if a particular item qualifies as a fixed asset.
Step 1: Enter a Sales Receipt
- Begin by selecting +new and then select Sales receipt.
- Enter the donor’s name in the customer field. Enter the donor’s name if this is a new entry, then click + add new and Save.
- Enter the donation date in the Sales Receipt date field.
- Choose your newly created In-Kind Clearing bank account from the Deposit to dropdown menu.
- Select the appropriate item from the Product/Service column drop-down menu, then add any additional Description.
- With the donation assign the Class associated.
- In the Amount section, enter the donation’s fair market value (FMV).
Note: If you are unsure of the donation’s fair market value, speak with your accountant.
- Close after selecting Save.
Step 2: Enter a Bill
- Start by selecting +new and then select Bill.
- Enter the donor’s name in the vendor field. Enter the donor’s name if this is a new entry and then you have to select +Add new and then click on Save.
- From the dropdown menu you have to select the product or service that you have created, under Item details.
- On the sales receipt assign the same Class that you have assigned (Optional).
- Lastly, click Save and then close it.
Step 3: Mark the Bill Cleared
- You have to select +new and then select Pay bills.
- Select the Clearing account from the Payment account dropdown menu.
- The bill that you have entered selects the checkbox.
- After finishing, you have to select Save and Close.
In this article, you have all the procedure of recording and setting up in-kind donations in QuickBooks Online. But in case, you still face any issue related to this then you can connect with Dancing Numbers expert any time hassle free as they are available for their users all day and night. More you can do is to consult your accountant, if your donation should be recorded as an in-kind donation.
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Frequently Asked Questions (Faqs)
How to Record a Donation Transaction?
• For the products or services you donated you have to create an invoice.
• For charitable contributions you have to create an account.
• Now create a product/service item that is called Charitable Contributions.
• To the customer issue a credit note.
• Lastly, verify the credit note that was applied to the invoice.
How to Record Journal Entry in-kind Donations?
Setting up a separate revenue account is the standard procedure for recording in-kind donations, but the transaction’s expenses should be reported in the account that serves as that account’s functional expense. For example, the expense would be listed as Professional Services, and the revenue would be listed as Gifts In-Kind – Services.
What is the Difference Between in Cash and in-kind?
Cash was basically the most popular form of donation. A cash donation is one made with cash, a check, or a credit card, though lately in-kind donations have increased. Any non-cash item given to an organization to be used by the organization is known as an in-kind donation.