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Can our non profit account for inventory for incidental sales as an expense item?

We are a small non profit whose major source of income is private donations. We occasionally purchase promotional items with our logo. Some items are donated while others are sold from our website. Would it be acceptable to record the cost of purchase of these promotional items as a straight expense, rather than inventory offset by cost of goods sold? Thanks for your help.

Answers

Steve Sheridan
Title: Associate
Company: Dean Lewis Associates
(Associate, Dean Lewis Associates) |

My first thought is that you'd have to use COGS. Items that are donated would be inventory write-offs. I would check with your accountant though, and research what others in your industry typically do in that situation.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

If memory serves me right (might be prudent to check on my points)...

...it depends on your charter and Board. The way you treat this will be different (1) If you want to make this an ongoing thing (2) if this is just part of events/projects/campaigns.

If this is an ongoing thing and an integral part of your revenue generation, then it should be part of your over-all income statement (chart of accounts) design.

If this is just part of events/projects/campaigns, then it should be reflected on the revenue/cost part of those mentioned.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Are you selling them as a trading item or are they given as a promo/acknowledgement for a donation?

Anonymous
(Treasurer) |

These items are small, mostly educational items like pens, pencils and wristbands. We also have info cards, similar to calling cards which explain briefly who we are and what we offer. These items are sold sometimes individually to people who use them to educate others, sometimes in bundles, and sometimes they are given in bulk to doctors and other professionals to pass on.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Sounds like promotional material to me. And where people pay you to purchase them, I see that as a way of cost sharing the marketing expense, not income like fund raising, event surpluses, etc.
So I would track the next expense under my marketing expense group; if you buy once or twice a year, then amortize the expense.

Anonymous
(Treasurer) |

Thanks, Len - that sounds good to me. And it makes sense. What has been recorded previously as "sales" barely covers the cost of these promotional items, so it's reasonable to charge them against a marketing expense. I appreciate your help.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

I agree that these are period expenses. I would however record any money received as a donation, not as a contra expense.

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