A business owner is thinking of selling gift cards and asked how it will be recorded.
My response:
Sale of card
DT Cash XXX
CT Gift card (liability) XXX
Gift card redemption
DT Gift card (liability) XXX
CT HST Payable XXX
CT Sales XXX
They asked if there is another way / easier way to keep track of gift cards.
Does anyone know another method/process?
Correct, and nope. That’s why we have accounting programs.
If someone wants to keep a specific subledger of cards easily, number them and track 'em in Excel. But it’s not “easier”.
And, in most provinces (IIRC) if they are sold for cash (as opposed to a promo giveaway) they are a liability FOREVER, until cashed.
And then it depends on the type of gift card. A card good for $50 is just that - $50 applied against a purchase. If the gift card is for one free haircut or carwash or whatever, GST/HST has to be calculated at time of purchase. I hate accounting for gift cards.
Questions: (some already raised)
Are these for specified products or services, or just cash value?
Who is managing the gift cards? The shop or a third party like moneris?
You may wish to check the CRA documents on this subject. P202 comes to mind, but that is in reference to excise act. Once you have settled the nature of the card, bookkeeping flows from it.