We have donated an item of our stock to Help for Heroes and I wanted to know how to record it. If I make out an invoice for the item, for nil value, that takes care of my stock level (one item is deducted from our list). However, putting it at 'nil' doesn't really account for our loss of a stock item of £500 cost price. Does anyone know how to properly record a donation such as this?
Probably more than one way to do this but I would do a journal entry and DR the Donations Account and CR the Purchases account.
There is no need to show a "sale" if it is a charity or CASC.
Quote from HMRC
Gifts of trading stock
If you donate goods that your business makes or sells - your 'trading stock' - to a charity or CASC, you can claim the cost of these goods in your business accounts. This applies whether you're a sole trader or in business as a partnership or company. You don't have to include anything in your sales income for the value of the gift. So you can reduce your business's taxable profits by the full cost of the goods.
It's different if your business gives away trading stock to someone who isn't a charity or CASC. If you do this then you have to include in your sales income the full market value of the gift even though your business didn't get any money for it. This is referred to as a 'notional' trading receipt. So although you reduce your business's taxable profits by the cost of the goods, your business also has to pay tax on the notional sales income.
