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Expensing Against Restricted Funds
Hello, we are raising funds in order to donate product (books) to prisons, schools, etc. Should we expense the manufacturing cost of the book against this campaign or the sales/retail price of the product?
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2 Replies
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Sean, if your organization manufactors the items to be donated, you should use the funding to cover the manufactoring costs (restricted funding would be fully draw down by actual expenses incurred).
My thinking is if a book costs $10 to manufactor and is sold for $15, a $15,000 donation would allow for for the donation of 1,500 books, not only 1,000. Otherwise, you received $15,000 in donated revenue and only consumed $10,000 of it, leaving $5,000 of restricted revenue on your books.
I am open to others perspectives on this as I have not managed this situation myself and I am not a CPA.
With gratitude,
Dave
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Hi Sean and Dave, and thanks for participating in the forum! Not knowing all the specifics, I would see the restricted funds as going to the cost of producing the books (as well as any related costs like administration of the donation, shipping, etc). If the donors were donating the books as an in-kind contribution you would value that at the market value of the books but since you are having the books produced yourself I would see the donated funds simply covering the production and related costs. Looking forward to hearing from the community!