JE Entries for Gift Cards/Sales Help!!

[Accountant1234]

Hello, I was wondering if someone can help me figure this out.

Every month, I get a report that shows Taxable Sales, non taxable sales, sales tax, gift cards purchased and gift cards redeemed.

Example of last month's Sales JE:

Debit Bank 63036.08
Debit Partner's draws 9078.48
Credit Sales Taxable 63550.11
Credit Sales Non Taxable: 1957.19
Credit Sales Tax Payable: 6037.26
Credit Gift Cards Sold (liability): 570

Now, as you can see, I was just made aware that I should also include the Gift Cards redeemed during the month to lower and properly adjust the Gift Card Sales liability account.

The problem is that the amount of Gift Cards redeemed is included in the Sales Taxable amount.

How should I adjust the Gift Card liability account to properly show the correct balance. Last month the amount sold was 570 and the amount used was 349.78 (which is already included in the 63550.11 sales number.

I guess my questions is how should the sales JE be to include all and how should I go back and adjust previous months if I just found out the Gift cards redeemed amounts per month.

I am guessing I would Debit the liability Gift Cards Sales to lower it but against what account if I already counted the sale.

Thanks.

 

[Accountant1234]

Ps. Sales Taxable and Sales Non Taxable are income accounts.

 

[Samir]

Something isn't right.

Are the gift cards sold also included in the sales taxable amount?

 

[Accountant1234]

Something isn't right.

Are the gift cards sold also included in the sales taxable amount?

No, they are not. Gift cards sold are not taxable until redeemed, The taxable amount includes the redeemed gift cards amounts after backing out sales tax.

 

[Samir]

Let me see if I'm thinking about this right.

Gift card sold:
Debit bank
Credit Gift Cards Sold (liability)

Gift Card Redeemed:
Debit Gift Cards Sold (liability)
Credit Sales Non Taxable
OR
Debit Gift Cards Sold (liability)
Credit Sales Taxable
Credit Sales Tax Payable

So now going back to your question, there's a bigger problem--your previous entries weren't balanced.

If you had a redemption for a gift card, the sales would have increased, but something else would have had to be debited. Do the bank and partner's draw accounts tie up to the penny with their paper trail? I'm assuming the sales numbers come straight out of a POS system and are not altered.

 

[Accountant1234]

Let me see if I'm thinking about this right.

Gift card sold:
Debit bank
Credit Gift Cards Sold (liability)

Gift Card Redeemed:
Debit Gift Cards Sold (liability)
Credit Sales Non Taxable
OR
Debit Gift Cards Sold (liability)
Credit Sales Taxable
Credit Sales Tax Payable

So now going back to your question, there's a bigger problem--your previous entries weren't balanced.

If you had a redemption for a gift card, the sales would have increased, but something else would have had to be debited. Do the bank and partner's draw accounts tie up to the penny with their paper trail? I'm assuming the sales numbers come straight out of a POS system and are not altered.

Correct on the JE. I would put them under the Sales Taxable since most of the sales per month are taxable.

The sale total sales numbers, taxable or non taxable are correct because they are already including the gift cards redeemed.

Bank account ties up. Partner's draws doesn't. I am assuming that I would have to make an adj entry against Partner's draws for the amount of gift cards redeemed since they were already counted against the sales for the month.

 

[Accountant1234]

Also keep in mind not all sales money was deposited so that is why I have the partner's draws to balance the jes against bank deposits and sales reports

 

[Samir]

Also keep in mind not all sales money was deposited so that is why I have the partner's draws to balance the jes against bank deposits and sales reports

But does the partner's draw account balance to something? If not, then that's where it's probably being lumped in when the cards have been redeemed.

If so, than I'd get a report for all the cards redeemed up to this point and then just make the following entry:
Debit Credit Gift Cards Sold (liability)
Credit Partner's draws

Or, if you want to revise your JEs, you can do that too.

And then going forward, I'd make sure to break out any redeemed cards when making the JE. That should keep it all straight.

 

[Accountant1234]

Yes, I kinda figured that.

Thanks for your help Samir.

 

[Samir]

Yes, I kinda figured that.

Thanks for your help Samir.

You're welcome. Glad I was able to help.