USA Journal entries for non profit giving away inventory as marketing

Joined
Jan 2, 2021
Messages
3
Reaction score
0
Country
United States
Imagine you have a nonprofit that sometimes gives away a product to prospective donors. There is a lot of this product. It's not a product they ever sell as a source of revenue for the organization, just something to draw new and more donations. What would journal entries be starting from the purchase of it to giving away (let's say $100 inventory)? I'm using QBO but I'm not sure it's relevant at this point as I'm just trying to understand the principles.

I'm thinking: debit inventory $100, credit cash $100, then the give away would be debit marketing expense, credit inventory 100? Really struggling w/ this one.
 

BIG E

VIP Member
Joined
Dec 19, 2020
Messages
294
Reaction score
41
Country
United States
I would be more concerned about whether this activity is authorized in the Organization's By-Laws - under what circumstances the product is given sometimes, rather than always, to prospective donors.
If inventory is maintained, does the organization have adequate insurance to cover events that would create illwill?
 
Joined
Jan 2, 2021
Messages
3
Reaction score
0
Country
United States
I would be more concerned about whether this activity is authorized in the Organization's By-Laws - under what circumstances the product is given sometimes, rather than always, to prospective donors.
If inventory is maintained, does the organization have adequate insurance to cover events that would create illwill?
Ignore the word sometimes as it's misleading. Apologies. They are always given away. Let's say it has about 1k of inventory in ten units of equal value and yes it does have insurance.
 

BIG E

VIP Member
Joined
Dec 19, 2020
Messages
294
Reaction score
41
Country
United States
Yes - you are correct in your journal entry thoughts -
But I must also caution you that there is a value limitation on "gifts" to a single party -
Under Internal Revenue Code Section 274(b)(1) - there's a $ 25 limit on value of promotional items per year
§274. Disallowance of certain entertainment, etc., expenses
(b) Gifts
(1) Limitation

No deduction shall be allowed under section 162 or section 212 for any expense for gifts made directly or indirectly to any individual to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25. For purposes of this section, the term "gift" means any item excludable from gross income of the recipient under section 102 which is not excludable from his gross income under any other provision of this chapter, but such term does not include-
(A) an item having a cost to the taxpayer not in excess of $4.00 on which the name of the taxpayer is clearly and permanently imprinted and which is one of a number of identical items distributed generally by the taxpayer, or
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top