Journal Entry for Donated Building

Journal Entry for Donated Building

In this article we would discuss the journal entry for donated building. There are two types of donation of building. The building donated to a company is called in bound donation and building donated by the company is known as outbound donation.

Journal Entry for Inbound Donation of Building

The inbound donation is treated as income for the company. The journal entry for inbound donation is recorded in the books of accounts by debiting the building being increase in asset and donation is credited being increase in income. The transactions are recorded at fair value of the asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Building		xxx
	Donation Income			xxx

 

Journal Entry for Outbound Donation of Building

The outbound donation of building is treated as donation expense for the company. Journal entry for outbound donation (donation given) is recorded by debiting the donation as expense and crediting the donated building being decrease in asset.

Date	Particular	Ledger Folio	Dr.	Cr.
	Donation Expense		xxx
	Building			xxx

Example of Journal Entry for Donated Building (Inbound Donation)

A building was received by the company as donation. The carrying amount of building was 10,000; however the fair value of building was 50,000. This transaction would be recorded by debiting the building with and crediting the donation with fair value of building i.e. 50,000. Journal entry is shown below

Date	Particular	Ledger Folio	Dr.	Cr.
	Building		50,000
	Donation			50,000

 

Example of Journal Entry for Donated Building (Outbound Donation)

A building was denoted by the company, the fair value was 50,000, and the carrying amount of building was 10,000. Journal entry shall be recorded in the books of accounts with the fair value i.e. 50,000. The journal entry is shown below

Date	Particular	Ledger Folio	Dr.	Cr.
	Donation Expense		50,000
	Gain on Building			40,000
	Building (Carrying amount)			10,000

It is important to note that difference between fair value of building and carrying amount of building is charged to profit & loss account. This difference may be profit or loss; in this case it is a gain, because the fair value exceeds the carrying value.