Donating Gift Certificates

Accounting for Gift Certificates Donated

Accounting for Gift Certificates Donated

How do you track the gift certificates you've issued as donations without overstating your expenses, ie reduction in inventory and promos?



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Excellent question!

I would think you would want to track the gift certificate as a sub-account (called "Donated Gift Certificates" or something similar) in your liability account "Gift Certificates Outstanding" ... but the sub-account is not a necessity.

I also think you input the value of the certificate at zero as there is no income, sale or cash received related to this transaction. Your entry would be debit "Cash" (or "Petty Cash" if you don't have a cash account) and Cr "Donated Gift Certificates". What this does is acknowledge that you have a potential liability sometime in the future.

If and/or when the lucky person redeems the gift certificate, you would make a zero value sale debiting "Donated Gift Certificates" and crediting "Sales". This removes the outstanding certificate and acknowledges you no longer have the potential liability.

Assuming you are talking about a product and not a service ... next you would reduce (credit) your inventory at cost for the product donated and debit "Promotional Gifts" (an expense account) not "COGS" as it wasn't a sale.

If the donation was a service, there is no entry to make on the expense side of the transaction as there is no cost associated with services on your books.


I might consider making "Promotional Gifts" a sub-account of my "Advertising and Promotions" expense account to keep my chart of accounts tidy.

CRA has a good page with other references on how to treat gift certicates at Businesses>GST/HST/General> Taxable or exempt> How to treat coupons> Gift certificates. The only difference I can see for treatment is that you will be expensing it to promotional gifts instead of COGS.

I did make the assumption that the gift certificate was not donated to a charity when creating the entries. If it was a charitable donation where you received a tax receipt, I would take a look at CRA's publication Memorandum - Donations of Gift Certificates found under Charities> Policies and Procedures at http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/gft_crtfcts-eng.html .

I think that is how I would handle it. Does that make sense to you ... have I missed anything? This felt like an exam question! :0)






P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for Donating Gift Certificates

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Oct 16, 2011
Donation of gift certificate
by: Tracy, Ontario

What is the journal entry for a donation of a gift certificate to a charity and what would it be once redeemed?

How is the HST accounted for, if any?

Thanks so much. Love the site!

Oct 16, 2011
Charities and Tax Receipted Donations
by: Lake

Hi Tracy,

I moved your post here as the subject is similar. So read the above post.

As you are dealing with a charitable donation, I would take a look at CRA's publication Memorandum - Donations of Gift Certificates found under Charities> Policies and Procedures at http://www.cra-arc.gc.ca/chrts-gvng/chrts/plcy/gft_crtfcts-eng.html .

Jan 31, 2012
Madoy, Richmond, BC
by: Recording Gift Cards

Can I write off the grand total of a purchase if I use a gift card to pay for part of it?

What I'm wondering is if I can write off the whole total of a business purchase if I use a gift card that someone has given me.

Example :

Purchase sub total: 421.77
HST at 12% 50.61
Gift card total: 189.95
Amount paid: 282.43

How do I enter this? Do I need to acknowledge the gift card?

Thanks in advance! :)



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Madoy, record the gift certificate as an owner's contribution. Your entry will look like this:

DR Expense account 421.77
DR HST Payable: 50.61
CR Owner's Contribution 189.95
CR Cash in Bank 282.43

Jun 02, 2013
Entry in QuickBooks
by: lheiy

What will be the entry in QuickBooks when they redeemed the gift check?



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"If and/or when the lucky person redeems the gift certificate, you would make a zero value sale debiting "Donated Gift Certificates" and crediting "Sales". This removes the outstanding certificate and acknowledges you no longer have the potential liability."

Jun 02, 2013
No money just gift check to surrender
by: Anonymous

Why debit cash since when they redeemed the gift check there is no money really involved there?



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"You input the value of the certificate at zero as there is no income, sale or cash received related to this transaction. Your entry would be debit "Cash" (or "Petty Cash" if you don't have a cash account) and Cr "Donated Gift Certificates". What this does is acknowledge that you have a potential liability sometime in the future."

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