USA Non-Profit - Liability Question

[psg325]

I am the Treasurer for a non-profit organization that is in the process of organizing a team of runners to participate in an upcoming road race. Each runner has pledged to raise $265 dollars for our charity by race day. In exchange for their participation, we have offered to cover the cost of their registration fee ($65 will be returned to them of the $265 they raise) and we will be providing each runner with a t-shirt that costs $20.

Once a runner has made a pledge, I have accounted for the transaction by recording an debit in "pledges receivable" of $265, a credit of $200 under "income" and a credit of $65 to the liability account "race payables."

Where I'm a bit confused is how to account for the t-shirt. This is a liability for us because with each runner's pledge we have agreed to provide a t-shirt once the pledge is fully raised. However, unlike the race registration fee, which is explicitly being paid out of the funds the runners raise above $200, the cost of the t-shirt is an organizational liability incurred at the time of the pledge but not connected directly to the amount raised. In other words, once a runner agrees to participate in the race, we will provide him/her with a t-shirt even if they are not successful in raising any/all of their funds.

So if I create an additional $20 liability for the t-shirt, what is the balancing account? Do I deduct $20 from the runner's pledge I've recorded as income or is there another way of accounting for this?

Any help would be appreciated. Thanks!

 

[bklynboy]

My understanding is that you need to report revenue at the gross amount of the raised (265) and a corresponding expense for the registration fee (65). Likelwise the T-shirt is an expense of the charity (20). The point is that the donors are expecting their full contribution to go to the charity with this being the revenue generated. Costs of the fundraising activity do not offset the revenue but are separately recorded as expenses.

This is discussed in US GAAP by the AICPA TPA's (TIS Section 6140.21 - 6140.22)

New Accounting Standards on Reporting Fundraising Expenses - Emerging Issues - Ethics - AFP

 

[Triest123]

My understanding is that you need to report revenue at the gross amount of the raised (265) and a corresponding expense for the registration fee (65). Likelwise the T-shirt is an expense of the charity (20). The point is that the donors are expecting their full contribution to go to the charity with this being the revenue generated. Costs of the fundraising activity do not offset the revenue but are separately recorded as expenses.

This is discussed in US GAAP by the AICPA TPA's (TIS Section 6140.21 - 6140.22)

New Accounting Standards on Reporting Fundraising Expenses - Emerging Issues - Ethics - AFP

=> I think the application fee $65 charged to the runner cannot be treated as income
because it will be refunded to the runner. That application fee is, the most likely, to
cover the administrative expenses of the organisation.