Recording Gift Certificates in QuickBooks – Sales, Redemption, and Donation

Accounts Needed –
  • Bank or Cash Asset
  • Gift Certificate Liability
  • Donation Expense
Items Needed –
  • Inventory items linked to Sales of Product Revenue or Service items linked to Service Revenue (you should have these set up already)
  • Gift Certificate Item linked to Gift Certificate Liability account
  • Gift Certificate Donation Item linked to Donation Expense Account

To record the Sale of a Gift Certificate to a customer:

  1. Open Sales Receipt and enter date, customer, payment type, etc. as you would for any sale.
  2. On the Items line, select Gift Certificate and amount.
  3. Save and close the Sales Receipt.

The sale of a gift certificate increases the Bank or Cash account and increases the Gift Certificate Liability account because you are obliged or liable for redeeming the gift certificate for goods.

To record the redemption of a Gift Certificate by a customer, perform the following:

  1. Open Sales Receipt and enter date, customer, and other info as you would for any sale.
  2. On the Items Lines, select the items the customer purchased whether inventory items or service items.
  3. On the Item Line below customer purchases, select Gift Certificate and enter the amount of the gift certificate redemption as a negative number. NOTE: If the purchase is more than the gift certificate amount, the customer will have a balance due. If the purchase is equal to the gift certificate redemption, there will be a zero balance. If the purchase is less than the gift certificate amount, there will be a balance on the Gift Certificate. In this instance, enter the total of the sale as the gift certificate redemption amount. If you wish to give the customer the remainder of the gift certificate in cash, then enter the full amount of the gift certificate. The sales receipt will show a negative amount which is the amount due back to the customer.
  4. Save and close the Sales Receipt.

The redemption of a gift certificate decreases the Gift Certificate Liability account. If inventory is purchased, the inventory is reduced and Sales Revenue account is increased. If a service is purchased, the Service Revenue account is increased. The Bank or Cash account is increased if the customer had a balance due, decreased if you issued a cash refund for remainder of gift certificate or unchanged if the gift certificate and the sale were equal.

To record the donation of a Gift Certificate, perform the following:

  1. Open Sales Receipt and enter date, customer (name of person or organization receiving the donated gift certificate), and other info as for any sale.
  2. On the first Line Item, select Gift Certificate and enter the amount.
  3. On the second Line Item, select Gift Certificate Donation and enter the amount as a negative number.
  4. Save and close the Sales Receipt.

The donation of a gift certificate increases the Gift Certificate liability account and increases the Gift Certificate Donation Expense account. No cash changes hands so the Bank or Cash account is not affected.

In order to view how your accounts are affected, run a Profit and Loss report and a Balance Sheet report. Be sure to include the dates of the sale, redemption and/or donation.  The Profit and Loss report will show the affect on the Revenue account and the Donation Expense account. The Balance Sheet will show the affect on the Bank or Cash account and on the Gift Certificate Liability account.

If you have any questions, contact me. I would be happy to provide assistance.

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