How to set up Gift Certificates as “parts” & redeeming them
Setting up Gift Certificates as “parts” & redeeming them
To set up a gift certificate as a part, perform the following steps:
- Set up a new account in your Chart of Accounts entitled, “Gift Certificate Outstanding”:
- In <Settings>, <Parts>, <Part Groups>, set up a parts group entitled, “GiftCert” with the Sales and COGS account pointers set to the account created in step #1. Even though the COGS GL pointer will not be used, you must still enter the account in here in order for you to be able to save the record.
- Set up a non-stock part, with no retail or cost, belonging to the part group created in step #2. Make sure that “Taxable” is unchecked.
The cost should be left blank. The Price could be left blank, though could read $25 if, for example, Gift Certificates were only sold in $25 increments.
To sell the gift certificate as a part, perform the following steps:
- Place the part created in Set-Up above on a parts or service order invoice.
- When it has been marked paid or charged on account, it will credit the gift certificate liability account, created in Set-Up above, and debit either cash on hand or accounts receivable. Make sure no tax is charged.
Here is an example of an invoice selling a Gift Certificate:
Here is the journal entry from it. As you can see, it credited the Gift Certificate Outstanding account, as the sale of a gift certificate increases your liability.
To redeem the gift certificate, perform the following steps:
- When a G.C. has been redeemed, it is to be added to the Payment tab of the invoice or the service order, as payment method. “Gift Certificate”. This will automatically debit cash on hand for that amount, but this information will be summarized on the Daily Book reports for journalizing after.
- When the Daily Book is set to pending, count the redeemed Gift Certificates in with the Total Cash Count, as if it were cash. The only transaction within the Daily Book displayed below is the $72.95 received on the invoice shown above. In fact, $47.95 was received in cash, and $25 was received in Gift Certificates. In the Daily Book below, notice how the full $72.95 plus the $100 float, for a total of $172.95 for Counted Total was entered.
After the Daily Book is closed, look on the report to see how much was redeemed in Gift Certificates and do a journal entry to credit Cash On Hand and debit the Gift Certificate Liability account, as created in Set-Up above. This will decrease your cash on hand (since you did not actually receive cash when the G.C. was redeemed) and decrease your gift certificate liability account. You could also combine this entry with your banking transaction, when recording your bank deposit.
Example of Payment Summary
In this example, the journal entry would be to credit cash on hand by $25.00 and debit Gift Certificates Outstanding by the same amount.
Example of Result in Gift Certificate Outstanding account: