What it means
Cash is not the only useful resource a nonprofit receives, since food may support a community programme, a donated laptop may be used for years, and free professional advice can replace a service the organisation would otherwise buy. Start by identifying what was actually given, because ownership of goods, temporary use of a building and donated labour are different transactions, and the terms, restrictions and expected use affect the accounting and operational records.
Do not assume every non-cash contribution belongs in income at a claimed retail price, since a recipient needs evidence of value and must follow its applicable framework, and the donor's advertised price may not be what the recipient would pay. For example, the UK and Ireland Charities SORP 2026 treats donated goods differently from donated facilities and services, calling for fair value for goods where measurable and using value to the charity for facilities and services in specified circumstances.
That SORP also distinguishes general volunteers from professional services, saying general volunteer effort should not be included as income when a reliable monetary measurement is not available, while the nature of the volunteer contribution is described in the notes. These are UK and Ireland rules, not a global default, since US not-for-profit guidance has its own presentation and disclosure requirements for contributed nonfinancial assets, so always check the standard governing the specific organisation and reporting year.
Record the gift when it arrives with a basic register showing description, quantity, date, donor, condition, any restriction and intended use, and for a service document who provided it and what work was completed. Physical inventory matters too, as donated food may expire and donated equipment can need maintenance or disposal, so a useful gift is not automatically cost-free to store and distribute.
Review usefulness before accepting, because goods that cannot be used may impose storage, safety or disposal costs. Valuation requires care, since a used computer is not necessarily worth the price of a new one, and a donated service may be worth what the organisation would reasonably pay for equivalent help, where the framework calls for that basis.
Keep a clear audit trail with quotations, market comparisons, independent valuations or other support as appropriate to the size and nature of the gift, because unsupported round numbers can overstate both resources and expenses. Restrictions affect use as well, since a donor might require equipment for a specific programme or forbid resale, so record those terms so the operating team does not use the gift for an incompatible purpose.
An in-kind gift can help the budget without increasing cash, because a free venue saves a potential rental payment but does not pay wages or utilities, so trustees should distinguish resources received from liquidity available for bills. Some gifts create matching expenses when consumed: under the Charities SORP, donated facilities and services that are used immediately can be recognised as income with an equivalent expense when the criteria are met, which can enlarge both sides without changing net surplus.
Do not promise donors a particular tax outcome, because the donor's deduction, receipt requirements and value rules depend on local law and facts, and the recipient's accounting value is not automatically the donor's tax value. For a nonprofit leader, in-kind donations broaden the resource picture.
Good records show what arrived and how it was used, while careful valuation avoids pretending every free resource is cash.
In practice
Real-world examples.
Example
A charity receives used laptops for its training programme. It records their quantity, condition, restriction and supported value under the applicable policy, and sets aside any unusable machines for safe disposal.
Example
An architect donates professional design work that the charity would otherwise purchase. The finance team checks recognition and measurement under its framework and keeps the architect's time record and a comparable quotation.
Example
Volunteers help at an event. The organisation describes their role but does not assume their hours must be booked as income.
Formula
Calculation
Illustrative supported value of donated goods = quantity x evidence-backed value per usable item, subject to the relevant accounting rules. Fifty usable laptops valued at $1,500 each would total 50 x $1,500 = $75,000. That calculation is not a universal recognition rule: condition, restrictions, measurement and framework still matter.
Suppose the charity actually received 60 laptops but 10 were unusable. Only the 50 usable items support the $75,000 figure, and the 10 unusable ones may add disposal cost instead. For donated services, an architect giving 40 hours of design work that the charity would otherwise buy at $150 an hour supports an illustrative value of 40 x $150 = $6,000, where the framework permits recognising such services. If the same architect's work was a general volunteer contribution with no reliable measure, the framework may require a description in the notes rather than income.Case study
Seen in the real world.
This wholly fictional case follows North Bridge, an invented community charity offered free office space and a batch of used computers. Staff initially put both on a single donations line at the donor's suggested price. Finance separated the gifts, checked their condition and use, and applied the organisation's reporting framework with documented values.
The charity and figures are invented; the lesson is to distinguish gift types. The trustees also asked finance to show separately how much of the charity's cash budget was unaffected by the gifts. The free space saved rent but still left utilities and wages to be paid, and the computers needed support costs, so the trustees did not treat either gift as new cash.
Watch out
Common mistakes.
- Treating a donor's list price as the recipient's automatic accounting value.
- Recording general volunteer hours as income without checking the framework.
- Failing to document restrictions, condition and actual receipt.
Questions
People also ask.
Is an in-kind donation always recorded as income?
No. Recognition depends on the type of gift and the applicable accounting requirements.
Can donated services have value?
Yes, but the framework may set conditions for recognition and the valuation basis.
Is this the same as a cash gift?
No. It may provide useful resources but does not necessarily provide cash to pay bills.
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