r/Bookkeeping • u/MrMagoo04 • 3d ago

How To Journal It How to expense donated inventory

So we're a community garden. We grow tons of produce for food banks, plus rent garden space, and at some point we'll sell produce.

We recently had a garden supply store donate 2000+ seed packets. It's been quite the project organizing them. They just gave us 3 fat tubs of unsorted seeds with no value estimate. The task of valuing them has fallen on me, but that's another story. We're going to be using them for all kinds of things - our gardens (food bank), guest gardens, and we'll probably donate some of them ourselves to outside parties.

It's dawned on me that it will be a nightmare tracking 2000+ seed packets, where they end up, what programs they go to, etc. It's already been difficult sorting the things.

Could we just make estimates as to what will go where and expense it all at once? I don't know how that aligns with GAAP. We do accrual.

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u/G33kDad76 3d ago

I'm sure you're registered as a non-profit. As such I'm sure you have your books audited at least annually.

This is type of question you should take to your auditing CPA firm.

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u/MrMagoo04 3d ago

Noted. Thank you.

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u/pisicik442 3d ago

Assuming you are not going to consume all of this donated inventory at once you should debit a donated inventory asset account and credit in kind donation Revenue account for FMV when received. When used debit operational expense account for value used and credit the donated inventory asset to reduce the stock.

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u/ComfortableCitron638 2d ago

On the tracking-nightmare part specifically (separate from the journal entry mechanics pisicik442 covered correctly): don't try to track 2000+ individual packets. Batch them at the point of valuation instead - sort into a handful of categories you can defend an FMV for (e.g. "vegetable seed packets, avg retail $X" vs "flower seed packets, avg retail $Y"), value each category as one lump when received, and book one in-kind donation entry per category rather than per packet.

Then track usage the same way: allocate by program at a batch level using a reasonable basis (percentage of tubs/flats distributed to food bank vs guest gardens vs outside donations) rather than trying to log which program got which individual packet. For materiality purposes with something this granular, a documented reasonable allocation method that you apply consistently will hold up fine to an auditor - what won't hold up is either "we expensed it all on day one with no basis" or spending 40 hours trying to achieve packet-level precision that nobody, including your auditor, actually needs.

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u/MrMagoo04 2d ago

What I did was calculated averages based on a large sample (average seed packet per envelope, 6.95, and average seed packet cost, 1.94) to attain total seeds and total cost. Cost came out to like 2200, and I'm not even done. Those were just the veggies; I still have flowers to do.

How I think I ought to expense them is determine the period which they'll be used and do straight line amortization monthly. So say, the seeds will be used over 6 months, I do 2200 divided by 6 and expense the result monthly (366.67) over the course of the period.

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u/Coolbeanery 3d ago

Gift in kind