Tuesday, February 28, 2012

QuickBooks: Managing Gift Certificates

Many of you may be considering giving Gift Certificates. There are special accounting needs to properly track them – as indicated in the three elements below.

Set up to track gift certificates


When you accept payment for a gift certificate, you accept the liability to redeem the gift certificate some time in the future. To fulfill that obligation and track the transaction in QuickBooks, you need to set up a liability account and special items to use on a gift certificate invoice.


To do this task
· Create an Other Current Liability account and name it something like "Gift Certificates."
· Create a new item of type "Other Charge" and name it something like "Gift Cert."


When setting up the item:
- Click the Account drop-down arrow and then click the other current liability account you created in Step 1.
-Leave the Amount field blank. You will fill in the amount at the time of sale.
-Make the item non-taxable.

· Create a new item of type "Payment" and call it "Gift Cert Pmt," for example.

When you sell a gift certificate

Using this method, the sale is recorded as a liability. The income will not show in your income account until the gift certificate is redeemed.

To do this task
· Create a new invoice.
· On the first line, enter the Gift Cert other charge item with the amount for which the gift certificate was purchased. (- This increases the Gift Certificates other current liability account by the amount of the gift certificate.)
· On the second line, use the Gift Cert Pmt payment item to show the amount you received in payment for the gift certificate. (- This increases your bank account when you make your deposit. - Accounts receivable is not affected.)
· Track the gift certificate number in the invoice's Description field. (- Note: The balance of the invoice should be zero.)
· Click Save & Close.

When the gift certificate is redeemed

You use an invoice to record the income from the customer's purchases and the reduction in liability. To do this task
· Create an invoice.
· Use the appropriate sales items with positive amounts to record what the customer purchased with the gift certificate.
· Use the Gift Cert other charge item with a negative amount for the amount of the gift certificate, but no more than the amount of the sale plus any applicable sales tax.


** If the amount of the sale was more than the amount of the gift certificate, the customer may pay the balance.

** If the amount of the sale was less than the amount of the gift certificate, QuickBooks will continue to reflect the remaining amount in the Gift Certificates liability account you created. You may want to issue a new gift certificate to the customer outside of QuickBooks to help track the remaining balance.

· Click Save & Close.

2 comments:

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