Skip to main content
J
Jan_P
September 26, 2022
Solved

QBD- How to handle gift certificates given to customer for winning a contest in Quickbooks Desktop

  • September 26, 2022
  • 2 replies
  • 0 views

Hello,

 

We regularly have promotional contests where customers win gift certificates to use on products we sell.  How do I create the "free" gift certificates?  What is the process for redeeming the gift certificates?

 

Thank you in advance!

Jan

Best answer by Rainflurry

@Jan_P 

 

There's nothing to record when you give a customer a promotional GC because you have not incurred any expense or taken in any cash.  The proper way to handle them IMO is to create a service item called "Promotional GC Discount" or something similar and link it to a promotional expense account.  Then, when your customer redeems the GC, discount the sale using the "Promotional GC Discount" item and you're good to go.

2 replies

A
Archie_B
September 26, 2022

Thank you for reaching us, Jan_P.

 

Let me show you how to track and how customers can redeem this gift certificates when purchasing in QuickBooks Desktop.

 

First, we need to create a liability account for the gift certificate. I'll show you how:

 

  1. Go to the Lists menu, then Chart of Accounts.
  2. From the Account drop-down, select New and choose Other Current Liability under the Account Type.
  3. Enter the Account Name. For example, Gift Certificate.
  4. Once done, click Save & close.

 

Then, we'll create a service item and use the account we created earlier as the income account.

 

Like this:

 

  1. Go to the List menu, choose Item List.
  2. In the the Item drop-down menu, hit New.
  3. Choose Service in the Type field and enter the name of the gift certificate.
  4. Under the income account, select the liability account we created.
  5. Hit Save & close.
  6. Next, create a Non-Inventory type item named advertising expense and link it to the advertising expense account.
  7. Click Save & close.

 

To issue a gift certificate, you'll need to create a sales receipt for the customer and enter the gift certificate item and amount in the first line. On the second line, enter the expense item with the same amount but in negative form.

 

If the customer wishes to use the gift certificate for their purchase., you can create an invoice with the gift certificate item. Here's how:

 

  1. Go to the Customers menu, then hit Create Invoices.
  2. Fill the fields with the customer's info like the Date Invoice #, Bill to/Sold to, and Terms.
  3. On the first line, list the items sold. Then, on the second line, enter the gift certificate item with a negative amount.
  4. Select Save & Close.

 

Also, to ensure that your books are accurate, I recommend consulting with your accountant about which account to debit.

 

I've added this article so you can learn more about managing customer transactions: Get started with customer transaction workflows in QuickBooks Desktop.

 

I'm always here if you need assistance with recording transactions in QuickBooks. Take care and enjoy your day!

    J
    JH981
    February 27, 2024

    Thank you for the explanation of treatment of Promotional Gift Cards.

    I have further questions.

    The way I see the entries you have described:

    Create Sales Receipt:

       DR - Undeposited funds

           CR - GC Liability

      DR - Promotional Exp

           CR - Undeposited funds

    Upon redemption of the gift certificate, create invoice that will DR - Gift Card liability

     

    We have an issue with the Promotional Exp entry as the Gift Card award did not involve funds at the point of the award.  But i understand that we need to credit Undeposited Funds.

    I am not sure we want the full amount to be charged to expense.

    Any additional help/comments would be appreciated.

     

     

    Rainflurry
    Rainflurry
    February 28, 2024

    @JH981 

     

    There is no entry when you give away a promotional gift card.  The only entry is a sale discount when, and if, the card is redeemed.  A promotional gift card is never an expense because the total of the gift card is not your expense.  For example, if you issue a promotional gift card that is redeemed for inventory, your expense is only the COGS, not the entire amount of the gift card.      

    Rainflurry
    RainflurryAnswer
    September 26, 2022

    @Jan_P 

     

    There's nothing to record when you give a customer a promotional GC because you have not incurred any expense or taken in any cash.  The proper way to handle them IMO is to create a service item called "Promotional GC Discount" or something similar and link it to a promotional expense account.  Then, when your customer redeems the GC, discount the sale using the "Promotional GC Discount" item and you're good to go.

      J
      Jan_PAuthor
      September 27, 2022

      Thank you!  That was easy enough. :)

      Terms & ConditionsAccessibility statement