There have been questions at my trainings on the specific journal entries for donations to be auctioned off or re-sold. From the great PPC Guides, I recommend them to any nonprofit finance professional, an excerpt:
“Organizations may receive contributions of gifts-in-kind to be used for fund-raising purposes. A common example is where an organization receives tickets, gift certificates, or merchandise from donors to be sold to others during an auction. An organization should recognize the donated item to be used for fund-raising purposes as a contribution and record it at its estimated fair value. When the item is subsequently sold (such as at auction), any difference between the item’s initially estimated fair value and the amount ultimately received should be recognized as an adjustment to the original contribution amount.
For all practical purposes, the initial estimation may not be that important – the eventual contribution amount that is recognized will be what someone was willing to pay for the donated item. Organizations should use their best estimates when initially valuing the donated items and adjust the amounts later when the actual auction takes place. As a practical matter, the time period between the donation of items for an auction and the actual auction may be short. Accordingly, some organizations may wait to record the items until they are actually sold. That would not be appropriate, however, if the items were received before year-end and the auction was held after year-end.
Example: An organization is given a piece of jewelry valued at $3,000 to be auctioned off to the highest bidder at the organization’s annual fund-raiser. The journal entry to record the initial gift-in-kind contribution is as follows:
Debit – Asset $ 3,000
Credit – Contribution revenue $ 3,000
At the fund-raiser, an individual purchases the jewelry for $5,000. The journal entry to adjust for the sale is as follows:
Debit – Cash $ 5,000
Credit – Asset $ 3,000
Credit – Contribution revenue $2,000
If the jewelry sold at auction for only $1,000, the journal entry to record the sale would then be as follows:
Debit – Cash $ 1,000
Debit – Contribution revenue $2,000
Credit – Asset $ 3,000
Hope that helps! And you should check out PPC’s guide to Expenses as well.
