Deposit paid for by third party

This solution came via an interesting question from a charity.

They are participating at an event that costs £1000. They are required to pay a deposit of £250. The ‘problem’ is that the deposit will be paid by a third party directly to the organisers. The third party has told the charity to treat it as a donation (ie. they do not want the deposit to be repaid). Here are the transactions. Note that there is a quicker alternative way further on (though not as obvious):

  1. Enter the invoice from the event organisers in Purchase Transactions (red books) From Unpaid Bills To <some expense account for events> for £1000
  2. Record the donation of £250. Set up a new ‘sales’ account called ‘Donations’. Make a Sales Transaction (blue books) From Donations To Cash for £250.
  3. Make a Transfer Transaction (green books) From Cash To Unpaid Bills for £250.
  4. When you pay the remainder, make another Transfer Transaction From Bank To Unpaid Bills for £750.

OR, the 3 step method

  1. As 1 above 2. Transfer Transaction From Donations To Unpaid Bills £250 3. As 4 above

I would use the second method and explain what this was about in the description.