How to Account for Contributions for a Silent Auction

Before auctioning off unwanted business supplies and equipment, account for their cost in your business financial records.

If you're a business owner and have equipment you no longer need, a silent auction for charity is an ideal way to ensure the monies earned go to a good cause. Assets of a business are usually subject to depreciation, meaning they are expenses on the accounting books over the useful life of the asset. If the contribution is an asset(s) that has been completely depreciated, then note on the Fixed Asset Schedule that the asset(s) was disposed. If the asset has value, adjust the accounting books to expense the remainder of the asset.

Things You'll Need

• General ledger

Instructions

1. Create a Charitable Contributions general ledger account in the Expense section of the ledger.

2. Decrease the Asset account by the amount originally paid for the contributed property. Generally Accepted Accounting Principles (GAAP) considers a decrease to an asset account a "credit."

3. Decrease the Accumulated Depreciation account (a contra-asset account) in the Asset section of the general ledger by the amount of depreciation previously taken for the asset. GAAP considers a decrease to a contra-asset account a "debit."

4. Record the difference between the original amount paid for the asset and the amount of depreciation taken as an increase to the Charitable Contributions account. GAAP considers an increase to an expense account a "debit."

Tips & Warnings

• If you are not certain how to record a contribution for an auction, consider hiring an accounting professional to assist you.

References

• Principles of Accounting; A. Douglas Hillman, Richard F. Kochanek, Corine T. Norgaard; 1991