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How to Record Donations in QuickBooks for Nonprofits

Can you help me with the following questions?  I'm the bookkeeper for a non-profit (church) and the books were set up years ago.  We are currently recording the donations in a "dummy" company/account and I have to switch back and forth from that account to the real account where the deposits are made. Seems like there must be a better way.   Is there a way in the real account to set up these "customers" and produce a giving statement at year-end for taxes?   We have a building campaign which people make pledges to and then send in payments to go toward that.  What is the best way to record the pledge (I've been creating an invoice) and then pay toward it (I've been using "receive payments?"  Then, we need a report which shows the largest donors at year-end and the percentage of donations vs. pledges.   Any help or advice you can give would be greatly appreciated.  Thank you so much!
You should add your donors as customers in the customer center.  Then you should add items for each of your donation categories.  It’s fine to have just one called donations, but you may also want to add one for your building campaign.  When you receive a payment, enter it in Customers > Enter Sales Receipts.  You’re entering your pledges and pledge payments correctly.

The Nonprofit version comes with several specialized reports including a Donor Contribution Summary and Biggest Donors/Grants.  If you don’t have Nonprofit, you can tweak the customer reports, though it’s sometimes easier to just customize a Custom Transaction Detail report.  Customizing reports is pretty easy once you get the hang of it.  Just open a report that’s close to what you’re looking for, click Modify Report and play around with the filters until it gives you the information you’re looking for.  Most reports also have Total By and Sort By boxes at the top, which are also really useful for customizing reports.


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This article is provided for informational purposes and is not intended to be construed as legal, accounting, or other professional advice. For further information, please consult appropriate professional advice from your attorney and certified public accountant.

Ruth Perryman - QuickBooks Specialist Written by +Ruth Perryman

Ruth is the an Intuit Premier Reseller that offers great deals on QuickBooks POS and QuickBooks Enterprise. She has provided expert QuickBooks help to thousands of businesses all over the world since 1996.

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26 Responses to How to Record Donations in QuickBooks for Nonprofits

  • Andrew says:

    Hi Ruth,

    I started using QuickBooks for Mac (2011) for our nonprofit in August last year and am still relatively new to both quickbooks and bookkeeping.

    Check donations for our organization are received individually, but mailed to our bank for deposit in batches. So far, I’ve been recording donations by customer>enter sales receipt, and using an item like “donation”. Up till recently I simply recorded these when batches of checks actually were deposited in the bank, and used the “deposit to” option at the bottom of the sales receipt window to indicate the bank account into which they were deposited. All worked well. Recently (as is the nature of things) I’ve tried to make two changes … and have run into a little trouble.

    Firstly, I’ve started recording sales receipts as soon as we receive a check – and record the check as deposited to “Undeposited Funds” at the bottom of the sales receipt. Then when the batch is actually deposited, I’m trying to record a deposit transaction from “undeposited funds” to the actual bank account. However, I have also started using webConnect to download our bank transactions instead of manually entering them from a physical statement (which was the practice last year). But …when I import the .qbo file, I don’t know how to process/categorize the deposit transaction. I can see the record there, but when I try to assign “Undeposited Funds” account as the account, I get an error message saying “You cannot use QuickBooks’ special Undeposited Funds account here.”

    Am I missing something?

    Thanks!
    Andrew

    • Hi Andrew,

      If you’re not seeing a list of payments to deposit that you can check off, you’ll probably need to make the deposits in Banking > Make Deposits. Then you’ll be able to match them up to bank transactions.

  • Paula G says:

    I am theTreasurer for my church and we just changed to using Quickbooks Pro for Nonprofits. When I did the online Quickbooks Pro for Nonprofit training to get started, I was told to place church members as vendors. Now I am finding out that I am having trouble doing the end of the year Total Contribution report since Quickbooks have the donors selected as customers. Is there a way I can change the profile of each donor to customer or is there another way to provide the total contribution report to each church mmber?

    • Hi Paula,

      Unfortunately, donors should be customers not vendors. Worse, there’s no way to change them. Not only that, the Total Contribution report is based on sales receipts and invoice payments which can only be entered for customers, not vendors, so even if you could change them you don’t have the correct transactions entered in QuickBooks.

      In other words, whoever trained you had no idea what they were doing.

      I’m so sorry for the bad news :-(

      Ruth

  • Hi Daniel,

    Unfortunately, QuickBooks doesn’t handle stock transactions nearly as well as MS Money or even Quicken. That’s because most businesses don’t own stock.

    Try this:

    1. Create a bank account called something like “clearing account”.
    2. Create a sales receipt for the donation and deposit it into the clearing account.
    3. Create a journal entry – DR the stock asset account, CR the clearing account.
    4. If you’ve entered everything correctly, the clearing account will be $0 when you’re done.
    5. When you sell the stock create a journal entry – DR checking, CR the stick account. You’ll probably also need to DR/CR a realized gains or losses account and/or a trading expense account.

    Ruth

  • Fouzia Haddad says:

    Hi Ruth,

    I started using quick books 2 months ago. My boss asked to restore the backup file so that all info is there. He gave me their startup file a year ago. I created all the accounts and recorded tuition payments for the last 3 months. I have just found out that I did not restore the right one. How can I restore it without damaging my data please? Btw, I am using non profit .
    Thanks.
    Fouzia

    • Hi Fouzia,

      You can’t combine two QuickBooks files. But there is an add=on that let’s you transfer transactions between QuickBooks files. You could restore the coorrect file and then transfer all the transactions you created in the last 3 months to the new file.

      Data Transfer Utility:
      http://www.q2q.us/dtuoverview.htm

      Ruth

  • Kelly says:

    I am using the quickbooks to record the cash donations of a mosque. Some of these donations goes for some small expenses paid in cash also. The rest of the donation is deposited in Bank. Which is the right way to record these donations, expenses and bank deposits. I am using a “petty cash” account for the small expanses paid in cash and the Bank account.

    • Hi Kelly,

      Deposit the donations used for small expense paid in cash into the petty cash account and then write a check from the petty cash account for the expenses. If you don’t keep cash on hand, the petty cash account balance will always be $0. If you do keep cash on-hand, you’ll want to reoncile the petty cash account to make sure the balance equals the cash on-hand.

      Only deposit the donations actually deposited in the bank into the bank account.

      Ruth

  • Jamie says:

    Hi Ruth,

    I am trying to enter a donation into quickbooks, but once I get it in there it will give me a cash reciept for the amount I have entered and a deposit. So it will cancel out the amount instead of adding it into the account. I have tried to delete the reciept but it will not let me unless I delete the deposit first. Is there something I can change to make it a debit and not a credit.

    • Hi Jamie,

      It sounds like you aren’t using a revenue account on the donation item you’re using on your sales receipt. Got to Lists > Item List and double-click on the item and check what you’re using for Account. It should normally be a revenue account.

      Ruth

      • Daniel says:

        I am the treasurer of my church. Recently my church purchased an QuickBooks 2012 Accountant (with non-profit). I converted MS Money FIle that we aree using in the past to Quicken 2012 and then to QuickBooks 2012. However, I still have a question on “How to record the stocks donations (not cash) into QB. The stocks were transferred from donor’s brokerage account directly into our receiving brokerage account. The donated value at the time we received the stocks will be the face value used for the year-end contribution receipt/statement from the church to the donor. In MS Money I could set up a account for such donation with the total value of the donation and included this account for year-end report. However, I am not sure what I should record such donations in QB. Since if I used one of the Assess Accounts created in QB, the value of that account will show up in the total. I also have a investment account to track all the stocks transactions throughout the tome (for selling the securities and transfer the procedding (cash) into one of bank account (Assess). We are doing building a new church facility and need the cash to pay our contractors for their work.

        Please advise me how to handle such recordings and transactions correctly in QB. Thanks!

        Daniel

  • Srey Nak says:

    Hi Ruth

    always I read your answer and help me more. Now I am still concern with the in kind of goods .Because When we received goods as like medicine. When we received the medicine the NGO have purpose like :
    1. Record the in kind of goods donation increase the in kind of goods ( revenue ) and in kind of goods ( expense ) in Quick Books and make the report to Donor. So How can I record it in QBs?
    2. The values of inventory of medicine. When received the medicine NGO want record it as like inventory item in Quick Book. NGO want to have value the inventory of medicine balance in inventory stock in Quick Books. Because the NGO want to track the how many medicine go in and how many medicine go out and use efficiency it. How can I record In Quick Books as like value of medicine stock and in kind of goods ( revenue) and in kind of goods (expense) at the same time when received the medicine from donor?

    • Hi Srey,

      How best to book it really depends on when you want to expense the in-kind donations, and you really should check with your tax preparer to help answer that question.

      If you choose to expense the in-kind donation at the same time you book the revenue, I’d two service items – one for the in-kind revenue, the other for the in-kind expense and use them on a $0 invoice or sales receipt. The revenue item will have the positive amount, the expensive item the negative amount. Do an inventory adjustment to increase your on-hand quantities with a $0 cost. This will increase in-kind revenue and in-kind expense at the same time.

      If you choose to expense the in-kind donation as you use or sell the inventory items, I’d also create a $0 invoice or sales receipt. The revenue item will still be the positive amount, but the inventory items will have the negative amount. This will increase in-kind revenue and the inventory asset balance. When you use or sell the items, create another $0 invoice or sales receipt with the inventory items on it but with a $0 sales price. This won’t affect revenue, but it’ll reduce your inventory balance and increase your COGS balance. So make sure that the COGS account on your donated inventory items is an in-kind expense account.

      Ruth

  • Srey Nak says:

    I am new accountant with Non profit.I don’t know how to record the inventery donation from Donor in Quick Book.

    • Hi Srey,

      If you aren’t concerned about valuing the inventory, create a $0 bill by entering the inventory items on the Items tab with $0 cost.

      If you are, you can still create a $0 bill with the inventory items on the Items tab but then you’ll add an offsetting “in kind” revenue account on the Expenses tab with a negative amount. You could also create an inventory adjustment (Inventory > Adjust Quantity/Value On Hand) using the “in-kind” revenue account as the Adjustment Account.

      Ruth

      • Srey Nak says:

        Hi Ruth

        I always look all your answer and help me more. Now I have still concern with in kind of goods as like the medicine. When NGO received medicine they one make the medicine stock and track it in Quick Books. How to record the kind of goods donation and track the balance of medicine stock In Quick Books?

        Note: My purpose when received the medicine :
        1. I want record the in kind of good donation in Quick Books. How to record it? 2.When received the medicine I want making the inventor of medicine in Quick Book How can I do ? Because NGO want track the medicine how much go in and how much go out ?

  • Jonathan Lewis says:

    I understood inputting donations via “Enter Sales Receipts”. The problem I encounter is that after inputting the check information, Quickbooks changes my entry into a negative and gives me this error message: “You cannot record a negative sales receipt. Use the create credit memos/refunds window.” What causes this change and how can I correct this?

    • Hi Jonathon,

      Where are you entering the check info? I’m guessing you’re entering a payment item instead, which are only used if you received multiple payment types (cash and check). Instead, it should be entered in the Payment Method box at the top of the invoice.

      The total on the sales receipt should equal the amount of the check you received.

      Ruth

  • Deborah Smith says:

    Hi, I’m new to Quick books and book-keeping, could you please tell me how and where to enter a cash donation that was made by my company. The donation was paid by cheque and this needs to be entered but I don’t know how or what to put it against.

    Thanks
    Deborah

    • Hi Deborah,

      I don’t know a thing about the Australian version of QuickBooks, but in the USA version you’d write a check at Banking > Write Checks.

      Ruth