In-kind contributions can be an important source of non-profit revenue, particularly if the item or service is central to the organization’s mission. Often, in-kind gifts can help your non-profit provide programs and activities at a reduced cost.
Since the in-kind donation may not be counted on to run a project in the future, recognizing the income provides better financial information on the cash generated or cost of the project.
Types of In-Kind Contributions
Instead of cash, in-kind contributions are donations of goods, services, or time.
- Goods: Tangible goods include things like cars, equipment, books, food, furniture, and supplies. Goods may also be intangible, such as advertising, patents, royalties, and copyrights. Goods may be used, surplus, brand new, or even loaned
- Services: Professional services donated by groups such as corporations, small businesses, vendors, colleges, individual professionals, or tradespeople. For example, your organization could be given transportation or publishing support
- Donation of time: Occurs when people provide time free of charge. An employer might also loan paid employees to help support a non-profit.
Example: Catering for Event
A local caterer donates food for a fundraising event of a non-profit organization. In order to receive “credit” for his donation, the caterer provided the non-profit a bill for the amount he would normally charge a client for the same food. The amount of the bill is the amount of his donation.
Recording the In-Kind Donation
Before the donation can be entered into QuickBooks, an income and clearing account, as well as the product/service item, should be set up to record the donation.
The in-kind donation is reflected as in-kind donation income and catering (or the appropriate expense) on the profit and loss statement. The result is financial information for the event that includes the total amount of donations and expenses. Next year you have complete financial information to plan the event again.
Check with your accountant regarding specific accounting rules when recording in-kind donations.
If you need help setting up a system for in-kind donations, email me at kathy@budgetease.biz. We specialize in bookkeeping for non-profit organizations and would be happy to help you with this or any other bookkeeping questions you have.
