How to handle In-Kind Donations

How would you handle in-kind donations for your business. Let's say you offered a serviced but you donated it, how do you track that? Would you make an asset account or liability account? Would you record it as outflow or inflow? Or would you do something else completely different? Thanks.

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  • Why are you trying to track it? As a business, just expense the out of pocket business costs of providing the service for free.

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  • So that I'll know how much we donated in services. How do you do that? It's not coming from a bank account. What kind of account do I set up in YNAB?

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      jclay12345 Donation of services doesn't have a monetary value because you can't write it off.

      If you want to track it for informational purposes, use a spreadsheet. No reason to have an account in YNAB.

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    • nolesrule It does have a value. It's an actual service we provide. Occasionally, we do it for free. That's a write-off.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • 1
      • Reported - view

      jclay12345 There is no write off of donated services. Only real expenses incurred in conjunction with the services. Trust me, I went through this with my accountant when i was volunteering my IT services to a charity.

      In accrual accounting you would accrue revenue and then write it off, but it's the same as having zero revenue from the service in the first place. If you are cash accounting there's no revenue, because revenue = cash income. YNAB doesn't do accrual accounting very well and is an extremely poor substitute for a business accounting program except for the simplest of cash basis businesses.

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      jclay12345 Essentially, you'd treat it the exact some way you currently treat a non-payment for services rendered. How do you handle that in YNAB?

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    • nolesrule What about with physical products. You produce a product and it now has a value. You donate that product. How would you track that? 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      jclay12345 Cost of Goods Sold. Again, you can only claim losses on actual expenses. How you do that depends on how you track and report the expenses. A product has a real cost in terms of expenses.

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    • nolesrule Thanks!

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 yr ago
      • Reported - view

      nolesrule my accountant would disagree in theory, but not in practice. There's some pro bono rules to follow (vs gift in kind rules), lots of stuff to track and record (milage, hours, etc) and she basically said not to even try. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 yr ago
      • Reported - view

      Ben Khaki Storm mileage is an implicit expense. Donation of time can never be written off against realized income.

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      • Khaki Storm
      • YNAB book topics online: https://support.youneedabudget.com/r/q5w48j
      • Khaki_Storm.1
      • 1 yr ago
      • 1
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      nolesrule I'm not claiming to be an accountant. I found an article that seems to say most of what I was told by my accountant: https://www.thebalancecareers.com/can-you-deduct-pro-bono-services-from-your-income-taxes-3515623

      The article agrees with you, but adds 'in most cases' or 'typically', which leave room for the exception and that's when it's time to talk to a professional. 

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