A Not-for-Profit organization incurs expenses for a fundraising dinner. The dinner cost $10,000. It generated $25,000 in ticket sales. The fair value of the dinner provided to attendees was $8,000. <br/><br/>How should the $10,000 cost be reported?

Answer options:

$10,000 Program Expense

$8,000 Program Expense (or Direct Benefit to Donor) and $2,000 Fundraising Expense

$10,000 Fundraising Expense

Netted against revenue.

How to approach this question

Costs of direct benefits to donors (the meal) are distinct from fundraising costs (solicitation).

Full Answer

B.$8,000 Program Expense (or Direct Benefit to Donor) and $2,000 Fundraising Expense✓ Correct

The cost of the item given to the donor ($8,000 meal) is classified as a cost of direct benefits to donors (often program or separate line). The remaining cost ($2,000) is fundraising.

Common mistakes

Classifying the entire event cost as fundraising.

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