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Accounting For Gift Cards

How to Account for Gifts-in-Kind By Sheila Shanker, eHow Contributor

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If you've ever donated used goods or other non-monetary items to a nonprofit organization, you were making in-kind contributions, also known as gifts-in-kind. These types of gifts may be substantial, such as a donation of a building, pianos or artwork. In-kind gifts could be in the form of services, such as volunteer work. According to the 2010 report from the Corporation for National and Community Service, the estimated annual value of volunteer work in the U.S. was about $169 billion in 2009.

Instructions

  • 1. Create accounts for gifts-in-kind in the general ledger. One account should be a revenue (credit) account and the other could be an expense or an asset account (both are debit accounts). The revenue and expense accounts are compiled on the statement of activities. The expense account could also be reported on the statement of functional expenses, when the nonprofit is required to prepare it. The asset account is compiled as part of the statement of position, the balance sheet equivalent in the nonprofit world.

  • 2. Identify the fair market value of the goods or services donated. You can find these numbers online or in the classified sections of your local newspapers. Depending on the value of the item, the donor may provide an appraisal report, facilitating this process. Be sure to document your valuation in writing, keeping dated Internet printouts or copies of the classified sections of newspapers. You could have a spreadsheet to analyze and summarize in-kind donations with dates, descriptions and amounts associated with these items.

  • 3. Prepare journal entries by crediting gift-in-kind revenue accounts and debiting expense or asset accounts. For example, suppose that an organization receives a piano valued at $10, 000. The journal entry is to credit a revenue account and to debit an asset account for $10, 000. Another example is for an organization that receives $3, 000 in canned food donations. In this case, the journal entry is to debit a gift-in-kind expense and to credit a gift-in-kind revenue item.

  • 4. Separate in-kind service donations paperwork. These are donations of volunteer time that may or may not be recorded in the accounting books -- only professional hours are recognized, such as those of doctors or accountants. However, the Internal Revenue Service requires nonprofits to disclose the number of all volunteers on the Form 990 line 6 Part I "Summary." The 990 doesn't allow for reporting volunteering time as revenues and expenses/assets -- the IRS is only interested in the number of individuals donating services.

Tips & Warnings

  • Provide your gift-in-kind donors with receipts in accordance with the Internal Revenue Service regulations, which can be found on the Internal Revenue Service website.

Sheila Shanker

Sheila Shanker is a certified public accountant based in California. She writes online courses for professionals seeking CPE hours and has also published the book "Guide to Non-profits: From the Trenches." Her articles have been published in national magazines such as the "Journal of Accountancy, " "Architecture Business and Economics" and "Veterinary Economics." Shanker holds a Master of Business Administration.

Resources

Via eHow.com

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