How does a business account for giving away ‘free’ gift cards?
Dino! asked:
I need to know what accounting journal entries are made when a gift card (that was not bought, just given away) expires.
I need to know what accounting journal entries are made when a gift card (that was not bought, just given away) expires.
August 9th, 2009 at 7:06 am
This is justified when
1 you are trying to break into or expand into a market.
2 you are wanting to draw foot traffic into the store.
3 you are trying to build customer interest.
August 9th, 2009 at 8:00 am
List the giving of the gift card “promotions or advertising”
Post the expirey as Debit is same category
August 10th, 2009 at 10:42 pm
My first thought is, what journal entry was made when the gift card was initially given away? If one was made, then reverse it.
If no entry was made in the first place, than I wouldn’t make one now. If you have a list of the cards that were given away, just cross that one off and indicate it has expired and the date.
August 11th, 2009 at 3:37 am
This is most likely an Advertising, Marketing, or Promotions expense. This will end up on the Income Statement in one or more periods. While it costs the company something they hope by giving away a small sum thay you’ll come spend more $$$$$ with them.