 In this presentation, we're going to record the donation of office space to our not-for-profit organization. So, in other words, we had someone that donated not cash, but office space into the not-for-profit organization. Get ready, because here we go with zero. Here we are in our not-for-profit dashboard. We're going to jump on over to our Excel file to see what our objective will be. We're currently in tab 1, so we're in tab 1 here to record our transaction or see the accounts that will be affected. We have the office space donated. Market rent value is the $35,800. Note, if there's going to be a donation of something such as office space, we don't have cash taking place, but there still is a donation, there's still a transaction that we need to be recording in this case. One problem with this, of course, is, well, how do I know how much the amount will be if there's no cash trading hands here? They give an office space. What is that? How do I know? We have to use some kind of fair market judgment to determine the value of the office space. If we, the not-for-profit organization, are then using the office space, then we have to appraise it or look at somehow what the office space would be worth if it was a transaction that was a market type of transaction so that we can value what we should put it on the books for. Once that is decided, then we're going to be debiting or increasing the rent expense. We're going to put it on the books basically as an expense because we're still consuming the office space. We're consuming the office space in order to achieve our objective, that objective to be the programs that we are supporting in our not-for-profit organization. The other side then going to our revenue type of account, which is contributions, not exactly revenue, but in essence revenue. That's how we get money coming in. We're tracking the inflow and that's through the contributions. We're going to call it contributions without donor restrictions. That's going to be down here on the income statement side of things that we're going to be recording that. The net effect on the income statement is actually null, the income statement or statement of activities because what we're saying is, hey, we got a contribution of $35,800 and we consumed it because we're using it for rent and therefore the net effect on the net income is nothing. Net effect is nothing on the net income. Income goes up. This is going up in the credit direction. That means a credit. And then the expense is also going up, so no net effect. However, we do have an effect on of course the income side of things and the expense side of things to record this transaction. Now we also have this business of without donor restrictions. You might be asking why would it be without donor restrictions because it's clearly restricted by the fact that it's a rental property. What else are you going to do with it except use it for rental property? If it was cash, it would be less restrictive, wouldn't it? And that's true. If it was cash, it would be less restrictive. But when we say without donor restrictions here, we're basically saying that the donor, if it was restricted, the donor would have said, hey, you can only do this or use this for certain purposes. And that is the type of restriction we're talking about. So we're not talking about a restriction due to the kind of asset that the donor gave to us. We're going to be talking about a restriction due to them actually restricting us on what we can do with that asset. So that's going to be that characterization. Now, when we then record this in our system, what we also want to do, how are we going to put this into the zero system? Well, notice there's no cash transaction. So there's no set form that we would generally be recording for this as we will see with other types of donations. And notice we started with a little bit more complex of a donation so that we can kind of get a broad view of some of these topics and these issues as we go into it. And then we'll get into some other donation transactions, of course, in the problem. But note that we don't have a cash transaction. So we don't have our standard cash form that we can record on this. But we also still want to record the fact that whoever gave us the donation gave it to us so that we can track it basically kind of like a customer list on who gave us money. So that means we still would like to use the standard form, the donation receipt type of form, even though cashings are not affected. So rather than us just using a journal entry as might be the easiest thing to do to affect these two accounts in our zero system, we're actually still going to use a receipt type of form so that we can then still provide that that input that the increase in the receipt form. So I'm going to go back to zero here. So we're going to go back to zero and that form, the typical form that we're going to be using when receiving donations, typically cash donations is going to be in the plus button and it's going to be the receive money form. Now I do want to make one other change here before we do this and that's going to be to add like a clearing account because what I'm going to do here is this is receive money so that we can record that the fact that a customer or a donor gave us money and then I want to be able to put that into the clearing account and then we put it and then adjust it to where we want it to go, which is going to be the expense account. We're going to do kind of a two step process rather than a journal entry. To do that, we're going to set up another basically cash account. So I'm going to go back up top to the accounting item up top. We're going to go to the bank accounts. We're going to set up another bank account. This is just going to be a clearing account. When I say a clearing account, I mean it's going to go up and then directly back down in a very short period of time, not like a temporary account where it's going to go up in the whole period, but I'm talking one transaction and then the other right after each other back down to zero. So I'm going to add a bank account. I'm going to add a bank account here. And then again, we have to just basically choose an institution. So I'll just choose an institution and then we're going to say the account name. I'm going to call it a cash clearing account and the account type. I'm going to select the dropdown, see what we have. I'm going to just say other for the account type. I'm just going to pick a number here for the account number. This is not the number of the chart of accounts, but just a number for the account number, which we're not going to put an actual in one in, but we need something populated to move forward. Then I'm going to go ahead and continue with that. So I'm going to hit continue to do so. There it is. If we then check it out in our chart of accounts, let's go to the accounting dropdown now and go down to our chart of accounts. So now we have our chart of accounts and there is our clearing account. Now I should probably add an account number. So I'll make it 11, 10. So I'm going to click on it again and I'm going to go into the code and I'm going to call it 1110. And then we'll save that. And so, okay. And there we have it. And so now we have this clearing account. So the clearing account means that I'm going to hit that when I expect the cash account to go or this cash account to be needed to just go up and then right back down, rather than putting it into the checking account. And therefore if there's a problem, it'll be easier to see in the clearing account because the zero balance will no longer be zero. And we'll say, ah, something got messed up if the clearing account is not zero. Whereas if it was in the cash account, we wouldn't find it possibly until we do a bank reconciliation if something got messed up. So let's go back up top and let's do this. We're going to hit the plus button. We're going to then go down to the receive money. We're going to receive money even though, yeah, we didn't receive money. But this is going to be able to track the donors that we have. So we're going to say receive money. I'm going to put it into the clearing account here, the cash clearing account because it's going to be increasing and then decreasing. Then I'm going to say next. And then we're going to say, who did we get the money from? We will then set up just a generic donor. So this is someone that gave us the money. This isn't actually money. This is the rental property. And so I'm going to say donor one. And I want to set up a new contact for donor one. This would be an individual that's giving us the rental property. So we set up donor one. I'm going to say the date is going to be 010120. And I'll keep the reference number, nothing on the reference number. Then we're going to select an item. Now the items are things that we typically use. It's a for-profit organization to record goods and services to populate things such as they receive money and invoices more easily. We're going to use the similar function here. We're going to set this up kind of like it was a service item so that we can easily record these donor transactions without really needing to understand the accounts effect of the debits and credits for it. So let's set up our item. So I'm going to say new item, please. We want to set up a new item here. The item code is going to be the donation. Item name, donation. And then we're going to have it as I sell this item. So I sell this item. We're not going to put a unit price because people could donate whatever they want. Note that you might have some set donations. You might say, hey, this is a set donation price 1, 2, and 3. Or you can have an open donation and say you could donate what you want. If we had some set donations, we might make multiple donations. Donation 1, 2, 3, whatever our package might be. So then we're going to say the sales account, dropping down for the sales account. Notice what we have here. We've got a revenue account. Now, what I'd like to see on the sales account is something other than revenue, right? We're not sales. That sales sounds like revenue, right? We're supposed to call it non-revenue stuff because this is a not-for-profit. We don't have the profit. So it's got to be the contributions is what we would typically call it. Contributions without donor restrictions. So what I want to do instead of adding a new account here, what I'd like to do is just change this account to be contributions without donor restrictions. So what I'm going to do is I'm going to go back up top. I'm going to duplicate this tab. And I'm going to go to the chart of accounts in it. So I'm going to right-click on this tab, duplicate this tab. Then we're going to be in a new tab on the right. And let's go back up top. And let's go to our chart of accounts. I'm going to select the Accounting drop-down. Scroll down to the chart of accounts. Let's go into that chart of accounts. Let's find that revenue account, which we could go down to find it, or you could go to this little tab over here that says Revenue. So this will just basically break out the chart of accounts, just looking at the revenue accounts. There's the revenue account, the sales account. Let's go into the sales account. And then we're going to call this a different name. Now, it should remain as a sales type of account. It's going to be either Sales or Revenue. It's got to be some kind of, so the default is to have a sales type of account. That's fine. The account number, we can keep it at the 4,000. I just want to change the name to not be Sales, but Contributions. And then I'm going to call it Unrestricted. Unrestricted. And obviously our example problem has longer accounts here. They call it Without Donor Restrictions, which might be the more formal way. We might have enough space for it, but we only have so many characters, typically. So I'm going to say Unrestricted, make it a little bit smaller here. So I'm going to say Save. And then we have that set up. So now we have the name has been changed. Let's go back to the first tab then, back to the first tab. And now let's click off of here and see if we can go back on it. And actually let's close this out and see if I do it again. I'm going to go Item and then say New Item. And then the item is going to be a Donation. And then I'm going to Copy it, Copy, Paste. And then we're going to choose the Account, which has now been changed, right? Contributions, there we have. That's the one we want. And then Donation. So all we want is the selling item. Obviously we're not selling it because we're not a for-profit, but it's going to be the same kind of thing here. And we're not purchasing it and we're not tracking this item. That would be for Inventories. So that's all we need and we don't have any sales tax involved for a donation. So we're going to say Save. We're going to give us money. We're going to charge you sales tax. That'd be fun. Any case, we're going to say here it is. The amount is going to be 35,800. 35,800. 35,800. There we have it. And then we have the unrestricted categories. I'm going to put everything into unrestricted and I'm just going to put it into fundraising. So I'm going to put it into fundraising. So I'm the unrestricted. These are the categories we set up. And there we have it. And let's change the date up top. I went back into it and I got rid of the date. So this is going to be January 1st. January 1st. So there we have it. So what's this going to do? It's going to increase that new clearing account by the 35,800. The other side's going to go to the revenue kind of account, which is going to be the contribution account that we set up. So let's go ahead and do it and see what happens. We're going to say save here. We'll say save. And then we're going to go to our accounts. So I'm going to go to the second tab. Let's go to the second tab that we already have open here and look at our reports. So let's go to the accounting dropdown. We want to take a look at that balance sheet report. So let's open up the balance sheet. We'll bring it out to January. So I'm going to bring this out to January 31st and then update that report. We'll update that report and scrolling down. So there we have it. So the clearing account has now been increased. So that increased the clearing account. The other side is in the equity section because it's going to be on the P&L, the profit and loss. So let's go back up top. I'm going to right click on the balance sheet. I'm going to right click on the balance sheet tab up top, duplicate it. So now we have the balance sheet on the right. Let's go back to the tab to the left then. And now let's open up our income statement. Go into the accounting dropdown and down to the income statement. So we'll go into that income statement. And this is running for 2020. So that should be good. And then we have in the income line, we have the 35,000 for the contribution that is not restricted. And of course that's all we have here. That total 35,800 then carries over to the balance sheet and is in the equity section. So the equity section of the balance sheet is being constructed or built from the income statement. Now note, as we jump to these reports, I'm using them as the reports are formatted in terms of a for-profit organization. We'll talk more about the formatting of the reports in the future. How can we change the name and customize the reports and let them be presented in different ways? So we'll talk about that as we go, but that's what we have at this point. Now what we want then is we want to then adjust this account, this amount out and take it then to where we want it to go, which is going to be the expense report for rent expense. Let's take a look at one other report. I'm gonna go back to the income statement, right-click on this tab, duplicate this tab. Then I'm gonna go back to the tab to the left. We're gonna scroll up to the top and then we're gonna go to the accounting dropdown. We're gonna go to the reports. Let's take a look at the reports. And then if we go down to the sales side, if you choose more items to see all the sales, you can go to the income by contact. Let's go into the income by contact report. And this will give us an idea of that income number be broken out by the donors, which is what we want. We want to be able to break this out by who gave us the money, so that income by contact will break out the income number by who gave us the money, or in this case, the rental property. Also note that if we drill down on these numbers, that'll take us back to the source document. So if I go back into this number, I say here's the cash received form. That's the form that was used to generate this report. So I go into the cash received form and there's our document. So here's the transaction document. Also note that if we needed to give this form to somebody, we could then do so by going to the options up top and say we wanted to view it as a PDF so that we can print it. I'm gonna say, okay, let's view it as a PDF. And then it'll generate, I'm in Chrome. So here's the document being generated within Chrome. And if we open that up, there it is. So there's our receipt. So we can use this now. It would be nice if we could do a little bit of formatting to make this a thank you type of form donor. But it does record basically the receipt that we have. So for the charitable type of organization and of course, we can generate reports as we saw the report by cash, by customer or by donor. So if I go back to our report then, I'm gonna go back out with the back button and back again, back to our income by contact. So again, that's why we're gonna use that form even though it went into this clearing account. Now we're gonna take it out of the clearing account and we're gonna be putting it to the rent expense account. And so let's go back to the first tab then. So we're gonna go back to the first tab and we're gonna say this is gonna be money out form. So we're gonna take it out of that clearing account. So I'm gonna hit the plus button over here. We're gonna scroll down and we're gonna go to the spend money this time. And again, no money's actually being spent. We're just taking this out of the clearing account which is a cash type of account. It's gonna be coming out of the clearing account. So we're gonna pick the cash clearing account and then say next. And then we've got our information up top. So we're gonna say now this isn't gonna go to anyone in particular. So we're gonna, because it's gonna be just a clearing account transaction. So I'm gonna set up a vendor just miscellaneous. It's gonna go to the date 01.01.20. And then I don't need an item to record this. I'm just gonna record the amount. And so I'm gonna say this is gonna be one and the price or the amount that's gonna come out is that 35,800. And then the other account is the account we wanted to go into which is gonna be the rent account, the expense account. So let's hit the dropdown. Let's see if they have one for rent expense. So we're looking for rent. So miscellaneous, other, I don't see a rent expense. So let's go, let's try to type in there rent. Yeah, I don't see an account for rent. So we need an account number for it. So let's say we're gonna put it under 6.1.1.5. Let's say 6.1.1.5. So I'm gonna add an account. We're gonna say the code is gonna be 6.1.1.5. The account is gonna be an expense type of account. So I'm gonna select the dropdown up top and we'll scroll down and we're looking for the expense type of account. So we'll pick up the expense and this is gonna be rent. So we'll say rent expense and that's gonna be it. That's all we need here. Let's go ahead and say save. So we'll say save and then this one, note I'm not gonna put a category here and that means it's gonna be uncategorized. On the expense side of things we're gonna have to categorize these things in accordance with a predetermined percentages and I'm gonna go back at the end of the problem and record that, that predetermined percent in our practice problem will be education 40, service 20, 20, 20, 20. So we're gonna be putting it into unrestricted. So it's unrestricted because whenever we spend money it's gonna have to be unrestricted because we need to unrestrict it before we spend it. So if it was restricted, we'd have to unrestrict it. Then we will apply it out but I'll show you how to do that at the end. I think it's gonna be easier for us to input this information without first applying it and then go back in and apply them all one at a time. So then the date here is gonna be January 1st. I think I tried to type it in in a format it didn't like. So I'm gonna say January 1st. So there we have it. So what's this gonna do? Decrease the clearing account back to zero and record the other side to rent expense. Let's go ahead and save it and then check it out. So we're gonna say save. Then let's make sure it's okay. Green, that's okay, it means it's good. So then we're gonna go back to the balance sheet. Let's refresh this report or update it. So we'll update this report. Scrolling back down, nothing is in it now. Why? Because the two items are on the income statement. So if we go back to the income statement, update this report. We're gonna have two line items but one's an income, the other's an expense. So we have the contribution which is basically income 35, 800 going up and then the rent expense going up as well which brings the net income back to zero. So from a standpoint of our journal entry if we go back to Excel, that's what we expected to see. However, in order to have the form that we wanted to give the sales receipt and be tracking by donor, we had to do basically that two-step process and that just gives an idea of some of our objectives. Now most transactions of course, hopefully the donations, a lot of them will be cash donations where we won't have to do that first two-step transaction. We could basically just record that first donation form for it. So that's gonna be it for now. Let's get out of here.