Vendor Donations

Q. I've received donations from vendors for our office Christmas party. Where does this go on the accounts? Does it count as income?

A. You should flow your expenses and vendor donations through the same account, so that the donations reduce the ending expense. It's important that it all goes in/out of the same month. So if you collect any vendor donations before the expenses start coming in, those should be coded to a liability account named Vendor Events, then moved down to the expense account by journal entry in the month that the expense is paid. If you collect more than you spend, that overage can be held in the liability for a future event or it can be moved to Other Income.