Posted in Finance, Accounting and Economics Terms, Total Reads: 405
Definition: Bargain Sale to a Charitable Organization
The sale of a goof or service at a price lower than the market price for a charitable organization as a social cause is called bargain sale to a charitable organization. Usually the companies do not make profits on such sale and sell at a cost company had bearded for the same. If there is gain in this sell, the profit earned is reported as income. The donation part is written off as an expense that cannot be recovered. But the limits of the charitable contributions need to be maintained.
For example, a company had bought a land in 20 lakhs 3 years ago. But now it is not in use as the project to be done on that land is completed. A charitable organisation is looking for a new land to conduct its operations. The market value of that land is currently 15 lakhs. But as a social cause the company decides to sell the land at 10 lakhs only and show 5 lakhs as written off.
• Loss happens as the market value is high
• Increase in reputation, brand image and value among general public and other charitable organisations