Charity donations are divided into cash donations and in-kind donations. The accounting entries of epidemic public welfare donation are as follows:

When an enterprise makes a cash donation:

Debit: non-operating expenses-donation expenses

Credit: cash on hand/bank deposit.

When an enterprise donates materials:

Debit: non-operating expenses-donation expenses

Loans: Goods in stock

Taxes payable-VAT payable (output tax)

According to Announcement No.9 of the Ministry of Finance and State Taxation Administration of The People's Republic of China, enterprises responding to the novel coronavirus epidemic through public welfare social organizations, people's governments at or above the county level and their departments and other state organs, or directly donating free of charge to hospitals undertaking epidemic prevention and control tasks are exempt from value-added tax.

The accounting entries are as follows:

Borrow: Taxes payable-VAT payable (tax reduction or exemption)

Loan: non-operating income

At the same time, if the donated goods are purchased by an enterprise, the input tax related to the donated goods at the time of purchase shall be transferred out:

Borrow: non-operating expenses

Credit: Taxes payable-VAT payable (transfer-out input tax)