What is the journal entry to record a donation of services for a NFP entity?
When someone donates their services, they are really just donating their time. However, the key thing to note that is that donated services must be for skilled labor and not unskilled labor. For example, a lawyer, accountant, or healthcare professional would donate services in the form of their time to provide advice.
The professional would estimate what the fair-market-value of their time is worth (i.e. based on normal billing rate), and debit contributed asset and credit contribution revenue. The donated service could be restricted or unrestricted.
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What is the journal entry to record a contribution of assets for a not-for-profit entity?
When a donor contributes assets (cash, equipment, car, etc.), the value of the donation is measured at fair-market-value (“FMV”). Donations can either be restricted or unrestricted. As you can see in the example below, medical equipment was donated and the FMV was $25,000. For a donation with no restrictions (i.e. unrestricted), the NFP entity would […]
What is the difference between net assets with donor restrictions and net assets without donor restrictions?
When a donor makes a donation, they can mark it as restricted or unrestricted. When the donation is unrestricted, that means that the NFP entity can use the donation for really anything. However, when a donation is restricted, the NFP has to use the donation for specific activities (i.e. acquiring PP&E, investment, etc.) The balance […]
How are contributed assets or contribution of time valued by an NFP?
When a donor contributes assets or services (i.e. time), the NFP entity should record the donation at fair-market-value.