USA Recording money spent on donation to a local cause in balance sheet help

[Masimo Kazachin]

Hello,

I am a bit lost on this one. How would I record this:

my company donated items worth 23$ to a local cause/charity. It was spent from company money but the transaction/spending wasn't recorded anywhere. We discovered it now because the local charity sent us a thank you card. Now i need to record it. First, I think it should go in the income statement as an expense, right? Where does it go in the balance sheet? Asset or liability? I am thinking it shouldn't have a place in the balance sheet at all since it is neither an asset nor debt but am been told it should be reflected there. Am I missing something?

Sorry i am newbie to accounting.

 

[DTA93433]

Since you indicated that this was a donation of items (1) an expense should be reflected on the income statement as a charitable contribution and (2) an offsetting credit to Inventory (to reflect the cost of the item(s) donated on the balance sheet.

 

[Masimo Kazachin]

Since you indicated that this was a donation of items (1) an expense should be reflected on the income statement as a charitable contribution and (2) an offsetting credit to Inventory (to reflect the cost of the item(s) donated on the balance sheet.

Thanks Stephen. So, essentially it is a form of liability since it is definitely not an asset? The balance sheet template have asset and liability column? So, the inventory account should be credited as a liability?

 

[DTA93433]

The inventory account should be credited as a reduction to the asset account; not re-classified as a liability. However, if you need to accrue the amount then YES, debit the expense and credit the liability (for the accrual). Then when the contribution takes place, debit the liability account and credit the inventory. Makes sense?

 

[Masimo Kazachin]

The inventory account should be credited as a reduction to the asset account; not re-classified as a liability. However, if you need to accrue the amount then YES, debit the expense and credit the liability (for the accrual). Then when the contribution takes place, debit the liability account and credit the inventory. Makes sense?

Yes, Stephen! Thank you so much. You are awesome.