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How to Record Donations or Charitable Contributions in QuickBooks

· 4 min read
Debits

Introduction​

Recording donations and charitable contributions in QuickBooks is important for both accurate financial reporting and for taking advantage of tax deductions. Whether your business makes a donation or receives one, QuickBooks allows you to properly track these transactions. This guide provides a detailed, step-by-step process for recording donations or charitable contributions in QuickBooks.

Step 1: Set Up an Income Account for Donations (For Donations Received)​

1.1: Create a New Income Account​

  1. Log in to QuickBooks: Start by logging into your QuickBooks account.
  2. Go to the Chart of Accounts: Navigate to Accounting > Chart of Accounts.
  3. Create a New Account: Click on New to set up a new account.
  4. Select Account Type: Choose Income as the account type.
  5. Detail Type: Select Donations/Charitable Contributions Received from the detail type options.
  6. Name the Account: Enter a name like "Donations Received" or "Charitable Contributions."
  7. Save the Account: Click Save and Close to add the account to your Chart of Accounts.

Step 2: Record a Donation Received​

2.1: Create a Sales Receipt or Invoice​

  1. Go to the + New Menu: Click on + New and choose Sales Receipt if the donation was received immediately, or Invoice if the donation will be received later.
  2. Enter Donor Information: In the customer field, enter the name of the donor.
  3. Select the Donation Account: Under the Product/Service column, select the income account you created earlier for donations.
  4. Enter the Donation Amount: Input the amount of the donation.
  5. Save the Transaction: Click Save and close to record the donation.

Step 3: Set Up an Expense Account for Donations (For Donations Made)​

3.1: Create a New Expense Account​

  1. Navigate to the Chart of Accounts: Go to Accounting > Chart of Accounts.
  2. Create a New Account: Click New to add a new account.
  3. Select Account Type: Choose Expenses as the account type.
  4. Detail Type: Select Charitable Contributions/Donations Made.
  5. Name the Account: Enter a name such as "Charitable Donations" or "Contributions."
  6. Save the Account: Click Save and Close to add the account to your Chart of Accounts.

Step 4: Record a Donation Made​

4.1: Create an Expense Transaction​

  1. Go to the + New Menu: Click on + New and choose Expense or Check, depending on how the donation was made.
  2. Select the Payee: Enter the name of the organization you donated to in the "Payee" field.
  3. Choose the Expense Account: Select the expense account you set up for charitable contributions.
  4. Enter the Donation Amount: Input the amount of the donation in the "Amount" field.
  5. Save the Transaction: Click Save and close to record the expense.

Step 5: Track Donations and Contributions​

5.1: Generate Reports​

  1. Navigate to Reports: Go to Reports in QuickBooks.
  2. Search for Relevant Reports: Use reports like Profit and Loss or Transaction Detail by Account to track donations and contributions.
  3. Customize Reports: Customize the reports to focus on the donation accounts you’ve created for both received and made donations.

5.2: Review Tax Implications​

  1. Consult with an Accountant: Ensure your charitable contributions are properly categorized and documented for tax purposes.
  2. Keep Supporting Documents: Attach receipts, letters, or any other proof of donation to the transactions in QuickBooks for audit purposes.

Best Practices for Managing Donations in QuickBooks​

  • Separate Accounts: Keep donations received and donations made in separate accounts to simplify tracking and reporting.
  • Regular Reconciliation: Regularly reconcile your donation accounts with your bank statements to ensure accuracy.
  • Document Attachments: Always attach relevant documentation to donation transactions to maintain clear records.

Conclusion​

Recording donations and charitable contributions in QuickBooks is straightforward when you follow the steps outlined in this guide. Properly tracking these transactions ensures accurate financial records and maximizes potential tax benefits. By adhering to best practices, you can manage your donations efficiently and ensure they are correctly reflected in your financial statements.