Gift Card Sales Bookkeeping Question

Gift Card Sales

Gift Card Sales

Do you count the sale of gift cards when you sell the card or when the card is redeemed for merchandise?

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Jun 29, 2018
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starstarstarstarstar 		Recording Gift Card Sales
by: Stephanie

Thank you for your question about when you count the sale of gift cards.

When you sell the gift card you will count the sale as follows:

DEBIT Checking (asset)
CREDIT Gift Card Sales Liability

When a person comes back to redeem the gift card you will count the redemption as follows:

DEBIT Gift Card Sales Liablity
CREDIT Sales - Gift Cards

In this way you can track how much you have outstanding in gift cards at any given time.

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Gift Card

by Doris Peery
(Yorktown, VA )

My boss paid for materials with a gift card and his credit card. How do I enter the gift card?

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Oct 12, 2023
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starstarstarstarstar 		Gift Card Credit Card
by: BB

When your boss pays for materials using both a gift card and his credit card, you'll need to record both transactions to accurately capture the expenses in your bookkeeping.

Gift Card:
1. Create an expense account called "Gift Card Expenses" if you don't already have one.
2. Record the amount used from the gift card as a debit to the "Materials Expense" account and a credit to the "Gift Card Expenses" account.

Credit Card:
1. Use your existing method for recording credit card transactions. Usually, you would debit "Materials Expense" and credit "Credit Card Payable" or similar account.

Here's how you can record both:

- **Debit**: Materials Expense (for the full amount of the materials)
- **Credit**: Gift Card Expenses (for the portion paid with the gift card)
- **Credit**: Credit Card Payable (for the portion paid with the credit card)

This way, you are accounting for the full cost of the materials while also showing the different methods of payment used.

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Gift Certificates

What is the proper method to record gift certificates sold?

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Jul 18, 2011
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starstarstarstarstar 		Expiration Dates and New Laws
by: Anonymous

With new provincial laws in place (Alberta) are gift certificates held to the same restrictions on expiration dates as gift cards?

I donated a gift certificate a year ago for a 4 hour cleaning service and had stipulated a 6 month expiration date.

I was contacted last week by the recipient to redeem and advised that I could not enforce an expiration date.

The motivation to donate was two fold, to help find clients for my new business as well as help raise funds for the charity.

In the time since the gift cards donation I have increased my hourly charge but the gift certificate only stated a 4 hr. service with no value listed.

Am I under any legal obligation to honor this gift certificate or is it merely a moral obligation?

I have no way of confirming what if anything was paid for the donation and suspect that it may have been a leave behind that one of the volunteers took over a year ago.

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Golf Shop Gift Certificates

Gift Certificates

Gift Certificates

We have just recently opened a Golf Shop and would like to offer Gift Certificates.

We do not know how to make the transaction. Do we keep a ledger, numbering the certificates?

How do we keep track of the taxes? We know we can't enter the transaction in our register twice, so how do we handle all the necessary steps?

We just need to know what to do from start to finish.

We are currently doing our own accounting, so need to keep the records as simple as possible.

Thank you!

Rita Wise

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Jul 17, 2023
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starstarstarstarstar 		Gift Certificate Tracking Process
by: BB

When offering gift certificates in your Golf Shop, it's important to establish a streamlined process to track and manage these transactions. Here are the steps you can follow:

Design and print gift certificates: Create attractive and professional-looking gift certificates with unique numbers or codes to track their usage.

Sales and record-keeping: When a customer purchases a gift certificate, record the transaction in your sales system or register. Assign a certificate number to each one and keep a record of the buyer's information, certificate value, and date of purchase.

Tax considerations: Consult with a tax professional or accountant to determine the applicable tax regulations for gift certificates in your location. It's common for the tax liability to be incurred upon redemption rather than at the time of purchase. Ensure you understand and comply with tax requirements specific to gift certificates.

Gift certificate redemption: When a customer uses a gift certificate for a purchase, process it as a payment method for the transaction. Deduct the value of the certificate from the total purchase amount and document the redemption in your sales records.

Tracking unredeemed certificates: Keep track of any unredeemed gift certificates and their corresponding values. Consider implementing an expiration date policy to manage the validity of the certificates. If any certificates remain unredeemed for a specified period, you may need to account for them differently based on local regulations.

Simplified record-keeping: While maintaining accurate records is crucial, you can simplify your bookkeeping process by using accounting software like QuickBooks or other specialized systems designed for small businesses. These tools can help you track sales, gift certificate usage, and tax obligations more efficiently.

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Gift Certificate Donations

by Shelley
(Waterloo, ON)

When a company donates gift certificates for services, are they only recorded if the certificate is ever used?

I know that when you sell a gift certificate you credit that to your gift certificate liability account and debit the bank account. Then when the certificate is used, you record the sale and taxes (credit) and off-set the payment to your gift certificate liability account (debit).

I just need some clarification on the donated gift certificates.

Thanks.

I asked around on this one and the consensus is that a gift certificate for services should only be recorded when the certificate is redeemed. You would do this with a credit to the sales account and a debit to the donations account.

However, a donation of TIME is not tax deductible. So, some have said that the transaction would not need to be recorded at all.

Does anyone else have an opinion on this one?

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Jul 13, 2011
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starstarstarstarstar 		Retail Gift Certificates
by: Suzanne

Maybe it's different for us because we're a retail store. Donating a gift certificate basically works out as donating books or games. It's sales that don't get made and no extra payroll or anything else so it's pretty simple.
Jul 04, 2011
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starstarstarstarstar 		Gift Certificate Donations
by: Suzanne

I tend to credit donated gift certificates to my advertising and promotional account instead of the usual GC liability account. You could also set up a donations account under expenses.
Apr 06, 2009
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starstarstarstarstar 		Track Gift Certificate As A Liability?
by: Steve

When your services business donates a gift certificate, you might need to post a credit against a liability account.

I think it depends on the nature of your business.

Consider a school that donates a gift certificate for a "free lesson". Suppose the teacher is paid a fixed $20 per lesson.

To account for the future obligation to pay the teacher who provides the lesson, I think you need to post a $20 credit (increase) to a "Lessons Payable" or "Services Payable" liability account.

If the gift certificate expires without being used, then you can debit the liability.

Suppose the school didn't track gift certificates this way--i.e., suppose it waited to record the gift certificate until the free lesson was taken.

Then, the school could give out hundreds of these certificates, and the accountant would have no idea of the actual outstanding liabilities.

So, in the school's case, it is important, it seems to me, to consider the gift certificate a liability at the time of issuance. The key reason is that the school's cost of providing service (paying the teacher $20) is significant.

On the other hand, if the cost of providing service in your business is low, you might get by without going to the liability complexity.

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Gift Certificates and Bookkeeping

by Rae Seaman
(Victoria, BC Canada)

I own a small nail salon in BC, Canada, and I'm confused about how to sell and record gift certificates. I want the certificates to have an expiry date so that I don't have money hanging over my head for years. Should I sell a "service" instead of a "dollar amount" to be able to put an expiry date? Also, when do I claim taxes on the sale of the gift certificates?

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Oct 12, 2023
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starstarstarstarstar 		Gift Certificate Expiration Date
by: BB

In BC, Canada, you're correct that gift certificates sold for a "service" can have an expiry date, while those sold for a "dollar amount" cannot.

To make sure your gift certificates have an expiry date, you should sell them as a specific service (like a manicure or pedicure), rather than a general dollar amount.

Bookkeeping:
When you sell the gift certificate, record the sale in a liability account, such as "Unredeemed Gift Certificates."

When the service is rendered, move the amount from "Unredeemed Gift Certificates" to your "Revenue" account.

Taxes:

You should consult with a tax professional for the most accurate advice, but generally, taxes are claimed when the service is actually rendered, not when the gift certificate is sold.

By doing this, you can manage your gift certificates more efficiently and have less financial obligation hanging over you.

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Gift Paid to Clients

In accounting treatment, the gift items given to our clients, come into which ledger account?

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Oct 12, 2023
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starstarstarstarstar 		Client Gift Items
by: BB

In accounting, gift items given to clients are generally categorized under "Promotional Expenses" or "Marketing and Advertising Expenses." These gifts are considered a business expense aimed at building relationships or promoting the company.

Here's how you would typically record it in your ledger:

1. Debit: Promotional Expenses or Marketing and Advertising Expenses
2. Credit: Bank or Cash Account (depending on how the gifts were purchased)

By doing this, you're reducing your cash or bank balance and recognizing an expense that will appear on your income statement.

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Gift Received

A vender gave our company a large gift that we used to decorate our offices. How do we enter the value of the gift received by our corporation in the general ledger? Thank you.

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Oct 12, 2023
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starstarstarstarstar 		Vendor Gift
by: BB

When your company receives a gift from a vendor, it's generally not considered as income but rather as a non-monetary donation. This means it doesn't impact your income statement but should still be recorded for proper bookkeeping and asset tracking.

Here's how you could record the gift in your general ledger:

Debit: Office Supplies/Decor (Asset account)
Credit: Vendor Gifts / Donations (Equity or Liability account)

By doing this, you increase the value of your office supplies/decor asset account and recognize the gift as an equity or liability, depending on your accounting policy.

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Gifted Fixed Assets

by Deb
(Oklahoma)

We are a non-profit corporation using QuickBooks Pro. We have received fixed assets (cargo trailer, furniture, etc.) as gifts. How are these entered?

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Oct 12, 2023
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starstarstarstarstar 		Gifts In Kind
by: BB

For a non-profit organization using QuickBooks Pro, receiving fixed assets as gifts should be recorded accurately to reflect the donation and to track the assets. Here's a general way to do it:

1. **Create a new Income Account**: Navigate to the Chart of Accounts and create a new income account named "Gifts-in-Kind" or something similar.

2. **Create or Update Asset Account**: In the Chart of Accounts, create a new asset account for each type of asset you're receiving, if you haven't already. You could name these accounts "Cargo Trailer" and "Furniture," for example.

3. **Record the Donation**: Use the "Make Deposits" function to record the donation. For the "Received From" field, enter the donor's name. In the "From Account" field, select the income account "Gifts-in-Kind." Enter the fair market value of the donated item in the "Amount" field.

4. **Asset Increase**: Make a Journal Entry to debit the appropriate asset account ("Cargo Trailer," "Furniture," etc.) and credit the "Gifts-in-Kind" income account. This increases your asset value while balancing out the income entry.

5. **Documentation**: Make sure to attach any supporting documentation, like appraisals or donor letters, to the transactions for auditing purposes.

6. **Review and Confirm**: Make sure all transactions are correctly entered and align with your non-profit's accounting policies. You might want to consult with your accountant to ensure everything is set up correctly.

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Gifting Sale Price of Stock

What is the correct journal entry for recognizing a $25,000 gift to an employee who is buying 5% of our S-Corp for $100,000, considering that we are loaning the money for the purchase and gifting $25,000 to the employee? We also need to add this gift to their W-2 and provide a "withholding" bonus to cover estimated taxes on the gift.

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Oct 12, 2023
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starstarstarstarstar 		Gift To Employee
by: BB

In a scenario like this, where the company is gifting an employee $25,000 as part of their stock purchase and also covering their federal tax obligations through a withholding bonus, you'll have multiple journal entries.

For the $25,000 Gift:

Debit "Employee Receivables" or a similar account for $25,000

Credit "Owners' Equity" or "Additional Paid-in Capital" for $25,000

For Adding to W-2:

You'll need to adjust payroll records to reflect the $25,000 as a taxable gift. This won't be a journal entry but an update to the payroll system.

For Withholding Bonus:

Debit "Wage Expense" or "Bonus Expense" for the amount of the withholding bonus

Credit "Cash" or "Employee Receivables" for the same amount

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Gifts in Kind

by Linda
(Windsor, Canada)

When a charitable organization received a Gifts in Kind such as office supplies etc., how is it entered. Do you benefit from the GST on such receipts as well by entering as a tax credit?

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Oct 12, 2023
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starstarstarstarstar 		Charitable Contribution Gifts
by: BB

When a charitable organization receives Gifts in Kind, such as office supplies, the accounting treatment typically involves recognizing both the donation received and the increase in assets. Here's how to enter it:

Journal Entry for Gift Receipt:

Debit "Office Supplies" or "Inventory" for the fair market value of the supplies.

Credit "Donations Income" or "Gifts in Kind Revenue" for the same amount.

Example Journal Entry:

Debit Office Supplies $500
Credit Donations Income $500

2. For GST Tax Credit:

If the donation includes a GST (Goods and Services Tax) component and your organization is registered for GST, you may be eligible for a tax credit.

You would typically record the GST as a recoverable amount. This will depend on local tax laws and regulations, so consult your tax advisor.

Example Journal Entry for GST:

Debit GST Recoverable $25
Credit Donations Income $25

It's important to consult your accountant or tax advisor to ensure you're complying with all legal and accounting requirements specific to your jurisdiction.

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Giving Away Product Samples

What is the best way to record samples of our inventory that we give away to customers? I've been told I can put this under promotions, but I need to keep track of our inventory. Also, is GST included in this amount or not?

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Oct 12, 2023
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starstarstarstarstar 		Inventory Gift Samples
by: BB

The best way to record samples of your inventory given away to customers is to account for both the promotional expense and the reduction in inventory. Here's how you can do it:

Journal Entry for Inventory Reduction:

Debit "Promotional Expense" or "Advertising Expense" for the cost of the samples.

Credit "Inventory" for the same amount to reflect the decrease in your inventory.

Example Journal Entry:

Debit Promotional Expense $100
Credit Inventory $100

2. Inventory Tracking:

Update your inventory management system to account for the number of samples given away so your stock levels remain accurate.

GST Handling:

If GST (Goods and Services Tax) is applicable on the inventory items, you'd usually credit your "GST Paid" account to reduce the GST you've paid on those goods. This is because you're not making a sale.

Example Journal Entry for GST:

Debit Promotional Expense $5
Credit GST Paid $5

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Giving Customers Gift Cards

by td
(Wisconsin)

How can I properly account for a monthly special where we offer customers either a discount on their invoice or a gift card to local restaurants?

Specifically, how can I ensure the invoice total remains accurate if we provide a gift card instead of a discount? Also, how should the purchase of these gift cards be coded in our accounting system?

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Oct 12, 2023
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starstarstarstarstar 		Monthly Gift Special
by: BB

You can handle the gift card as a separate line item on the invoice, making sure not to mix it up with the discount option. Here's a simplified explanation:

Invoice Line Items:

Line 1: Product/Service provided.
Line 2: Gift card amount (if chosen by the customer)
Total Invoice Amount: Sum of Line 1 and Line 2

Journal Entries for Gift Card:

Debit "Expense: Gift Cards for Promotions"
Credit "Cash" or "Bank" for the same amount

Example Journal Entry for Gift Card Purchase:

Debit Expense: Gift Cards for Promotions $50
Credit Cash $50

3. Sales Discount Account:

If you go with a discount instead of a gift card, you can record the discount in your "Sales Discount" account.

Example Journal Entry for Discount:

Debit Accounts Receivable (Invoice amount)
Credit Sales Revenue (Invoice amount - discount)
Credit Sales Discount (discount amount)

4. Recording Gift Card in Invoice:

When you sell the product or service, issue an invoice with the full amount, and include a note that a gift card of $X.xx is included. The payment received should match the total invoice amount.

Gift Card Expenses:

These should be coded as "Promotional Expenses" or "Advertising Expenses," not as a "Sales Discount," because you're providing a gift card, not reducing the cost of your services/products.

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Stock Gift Certificate Bookkeeping Question

Stock Gift Certificate

Stock Gift Certificate

Can someone help me with the appropriate entries for a gift of stock where the gift is valued to the donor on the day of the gift, but the stock is sold the next day at a gain or loss? Thanks

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Oct 12, 2023
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starstarstarstarstar 		Gift of Stock FMV
by: BB

The accounting for a gift of stock involves multiple steps, including recognizing the initial value of the stock gift, and then accounting for any subsequent gain or loss when the stock is sold. Here's how to go about it:

When Receiving the Gift:

Initial Recognition:
Debit "Investments in Stocks" for the fair market value (FMV) of the stock on the day of the gift.
Credit "Donation Revenue" or "Gift Revenue" for the same amount.

Journal Entry on the Day of Gift:

Debit Investments in Stocks (FMV on day of gift)
Credit Donation Revenue (FMV on day of gift)

When Selling the Stock:

Calculate Gain or Loss:
Gain or Loss = Selling Price - FMV (on the day of the gift)

Journal Entry for Sale:
Debit "Cash" for the total amount received from the sale.

Credit "Investments in Stocks" for the FMV (on the day of the gift).

Credit or Debit "Gain/Loss on Sale of Stock" for the difference between the sale price and the FMV.
Journal Entry if Sold at a Gain:

Debit Cash (Selling Price)
Credit Investments in Stocks (FMV on day of gift)
Credit Gain on Sale of Stocks (Selling Price - FMV on day of gift) Journal Entry if Sold at a Loss:

Debit Cash (Selling Price)
Debit Loss on Sale of Stocks (FMV on day of gift - Selling Price)
Credit Investments in Stocks (FMV on day of gift)

These are simplified explanations, and the exact entries may vary based on your specific accounting guidelines. As always, consult with your accountant or financial advisor for advice tailored to your specific situation.

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Journal Entry to Record Receipt of Gift.

A C Corporation receives a gift of real property. The journal entry would be to debit fixed assets. Would the credit be to revenue or to equity?

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Oct 12, 2023
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starstarstarstarstar 		Gift of Real Property
by: BB

When a C Corporation receives a gift of real property, the credit side of the journal entry usually goes to a revenue account, specifically one designed to track non-operational income such as "Gift Revenue" or "Donation Revenue."

Here is how you would generally record the journal entry:

Journal Entry:

Debit Fixed Assets (Fair Market Value of Property)
Credit Donation Revenue (Fair Market Value of Property)

It's important to note that this entry reflects the receipt of the property at its fair market value at the time of the gift.

The reason for crediting a revenue account instead of an equity account is that the gift increases the assets of the company without a corresponding obligation to provide goods or services.

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