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How to account for donated gift cards

Cheart99Cheart99 Member Posts: 4

I'm scratching my head on how to properly account for gift cards I give out and how to account for the redemed value of them.

Example of situation:

1- I give out a donation of a $25 gift certificate for my products to a fundraiser. (how do i record this since I havn't lost that product income until it is redeemed but I also owe this to a customer now).

2- Customer comes in and buys $10 worth of product on their gift card. How do I imput this sale to subtract from what was used and what see what is left over?

Easy clear steps would be greatly appreciated as I've been trying all kinds of combinations and nothing is working right. :S

in Accounting Technical Support

Comments

  • MikegMikeg Member Posts: 995 ✭✭✭

    To record the donation of a gift card you would debit Charitable Contributions and credit Gift Card Liability. You may need to create these accounts in your chart of accounts. The Contributions is an expense and Gift Card is a short term liability. (Records your donation and your liability to provide a credit)
    When the customer presents the gift card for a purchase, it would be a credit to sales for the amount they used and a debit to the Gift Card Liability account. (Records the sale and reduce value of gift card liability)

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