Provision of charitable assistance by a legal entity – transactions

Charity is currently relevant in our country. But not everyone knows how to properly formalize the charitable assistance provided. This applies to both the benefactor and the recipient of assistance.

Clause 2, Part 1, Article 1 of the Law of Ukraine of July 5, 2012 No. 5073-VI "On Charitable Activities and Charitable Organizations" (with amendments and additions) defines charitable activity as voluntary personal and/or property assistance to achieve certain goals. Providing charitable assistance is not associated with the receipt of profit, compensation, etc. by the benefactor.

Both an individual and a legal entity can provide charitable assistance. Let's focus on the latter.

A legal entity as a benefactor

A legal entity can provide charitable assistance to beneficiaries (acquirers), which include a territorial community, a non-profit organization and any individual.

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In what areas can charitable assistance be provided?

According to Part 2 of Article 3 of Law No. 5073, such areas include:

• education;
• healthcare;
• ecology, environmental protection and animal welfare;
• prevention of natural and man-made disasters and elimination of their consequences, assistance to victims of disasters, armed conflicts and accidents, as well as refugees and persons in difficult life circumstances;
• guardianship and trusteeship, legal representation and legal assistance;
• social protection, social security, social services and poverty alleviation;
• culture and art; protection of cultural heritage;
• science and scientific research;
• assistance to the country's defense capability and mobilization readiness, protection of the population in emergencies.

Documentary support for charitable assistance

1. Letter of request for assistance. It should indicate the type of assistance and its intended purpose.
2. An order for the enterprise, which indicates: the type of benefit, amount, purpose, details of the beneficiary).
3. The transfer of charitable assistance to the recipient is recorded: by a payment order (when transferring charitable funds); by an act of acceptance/transfer of assistance (if any services are provided or goods are transferred).

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What to Consider When Accounting for Charitable Donations

When receiving charitable assistance from a legal entity, it is necessary to draw up a document, such as a receipt, and be sure to enter it into the accounting system. Beneficiaries in the income must indicate the amount of charitable assistance, its intended purpose, and describe in detail the expenditure of funds.

Charities must draw up a report reflecting the funds received/spent, balance sheet and reporting indicators.

Replenishment of the budget account by a benefactor

The money is already in the account (charitable contribution), so it is already considered part of the budget funds. The manager of these funds has the right to use them exclusively for certain purposes, that is, according to the previously established estimate). In this case, the funds are transferred to a special account.

Charity donation transactions

• Crediting to the charitable contribution account: Dt 2313 – Kt 7511
• Expenses from the account: Dt 2313 (2117, 6211) – Kt 2313

Crediting charitable donations to the cash desk of an organization/institution

If the benefactor provides assistance in cash, the beneficiary can only accept the provision of an application for the transfer of cash (approved by Instruction No. 103).

What is the further algorithm of actions: the recipient of funds deposits them into a special account and issues a receipt to the benefactor. In turn, the deposit of funds (charitable contribution) into the cash desk must be formalized with a corresponding receipt order.

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Transactions for crediting charitable aid in cash

• Funds accepted to the institution's cash desk: Dt 2211 - Kt 7511
• Credited to the account in the Treasury: Dt 2313 - Kt 2211
• Funds spent: Dt 2113 (2117, 6211) - Kt 2313

Correct execution and knowledge of transactions is a necessary aspect in accounting for charitable assistance provided by both individuals and legal entities.

If you have any questions regarding the accounting of charitable donations - both from the recipient and the provider of such charitable donations - please contact "Prikhodko & Partners". To schedule a consultation, fill out the form below.