Accounting for Donations

car donatedQ: An organization recently got a donation of a Motor Vehicle purchased for $40,000. How does the receiving organization account for it?


A: I would do the journal entry for this as follows:

Debit Motor vehicle $40,000
Credit Donation received $40,000


The debit is the easy part here: the business is receiving an asset, assets occur and increase on the left side so we credit it.

The credit described what occurred - we received a donation. This "donation received" account is actually an income account. Income occurs naturally on the right side as it means more for the owner (owner's equity) and therefore it's credited.

Since a donation is not usually the main or a regular source of income for a business, donations received would normally fall under "other income" in the income statement / profit and loss statement.

Hope that helps.

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Comments for Accounting for Donations

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Donations recorded for a specific purpose, is it a capital receipt or a liability?
by: sagar

Donations recorded for a specific purpose is a capital receipt or a liability.

Donation
by: Bakht Mohammad Momand

Hello Dears,
I have problem anyone can help me.

1) Donation Received in the form of Cash for Specific purpose $5000 so how to record journal entries for it.

Note: I am confused that donation received is Income or Liabilities. If someone can help me in the problem leave comments or someone can help me I will leave all information below.
Thanks.

Bakht Mohammad Momand
[email protected]
Facebook:
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Donation
by: Shabir Ahmed

When funds received for a specific purpose in the form of donation then it should be used for so it become a liability not income. The entry will be

Cash/bank (assets) dr
Donation (liability) cr

Why?
by: Anonymous

Why do you credit cash yet it is a donation?

There was no cash received in this transaction. The donation came in the form of the motor vehicle, not in the form of cash. The motor vehicle is debited.

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DONATION ENTRY
by: FAIZU RAHMAN.K.P

WE WILL TREAT THIS TRANSACTION AS BELOW:
MOTOR VEHICLE A/C DEBIT
CASH A/C CREDIT.
BECOZ WE WIL GIVE A NOMINAL VALUE FOR THIS TRANSACTION SAY FOR RS.1, OR RS.10 ONLY/-.
WE HAVE TO SHOW THIS FIXED ASSET IN OUR BOOKS OF ACCOUNT... THAT IS WHY WE SHOW THIS TRANSACTION LIKE THIS

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