Nonprofit Income Accounts: Special Events Part I

What’s the number one accounting question on everyone’s mind about a special event?

“How much did we make?” of course!

We are talking about events that are primarily fundraisers, not events held to further the organization’s exempt purpose. It gets complicated when you have events for both program and fundraising purposes, but we’ll tackle that scenario another day. First let’s deal with the fundamental accounts for fundraisers.

Basic Accounts for Fundraisers

The basic accounting framework for special events uses two accounts in the income section of the profit and loss report set up as sub accounts under Special Events. The accounts look like this:

Special Events (parent account, not for data entry)

Special Event Income (sub account of Special Events)

Special Event Direct Costs (sub account of Special Events)

The Special Event Income and Direct Costs accounts net together to present net income from special events in the income section of the profit and loss report.

Recording Event Income and Direct Costs

Record all event income to the Special Event Income account. Include ticket sales, sponsorships, auction sales and contributions from the event. A side note — ticket sales likely are part contribution and part exchange transaction. We’ll dig into that distinction in our next post.

Record all event costs to the account Special Event Direct Costs. Yes, it feels weird to post expenses to an income account, but trust us on this one. Record costs that represent “direct benefits to donors” including venue rental, meals, entertainment, decorations, and raffle prizes. You can also post the costs of printing event invitations and advertising to this account; include a good description so these expenses can be distinguished easily from direct benefits to donors. Do not record the value of staff time used for the event to this account. While it’s important to track staff capacity used by events, the value of that time should be recorded as fundraising expense.

If you follow the above advice and use only these two accounts, you will be well ahead of the game. The problem we see is that people mix special event income and expenses into the income and expense accounts used for the rest of the normal operations of the organization.  Then it becomes nearly impossible to figure out what you made on an event. Even worse, the regular operating results of the organization are now distorted because of the special event transactions.

Using a Class to Identify Events

We know what you are thinking – you use a Class in QuickBooks to identify the event. Even if you do that, and you record income and expenses to accounts used for normal organization operations, you can’t run a regular profit and loss report and see the net results of the event, or the results of the rest of the organization, without the effect of the event. We think using a class is a great idea – just pair it with separate accounts for special event transactions.

Presentation of Special Events for Audited Financial Statements

If you search online for “special event reporting” you’ll find umpteen articles that describe the Generally Accepted Accounting Principles framework of how to present special events based on whether the event is “ongoing and major” or “peripheral or incidental,” and the various allowable presentations. For bookkeeping purposes, meaning the way you account for special events in your accounting software, treat all special events as “peripheral” in the sense that special events are not the reason your organization exists.  You do the fall gala, the pet parade and the 5K run because you want to raise money for your cause!

Your auditors will appreciate having special event transactions accounted for separately. They will be able to determine the best presentation of the events for audited financial statement purposes, and they will have the detail they need to prepare Form 990. You will appreciate it, too, because now you will always know the answer to the question, “How much money did we make?”

Next post – we’ll dig deeper into the different types of special event income and expenses and how they may be treated for tax and reporting purposes. Using only two accounts, one for special event income and one for event direct costs, is an oversimplification, especially for larger events. But it’s a step in the right direction!

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