How to record gift card sales and redemptions in QuickBooks Online
Updated
The short answer
When a gift card is sold, credit a gift card liability account, not income. When a customer pays with a gift card, debit that liability and credit the revenue for what they bought. Over a month, post one credit for gift cards sold and one debit for gift cards redeemed in your sales journal entry.
How to do it by hand
- Create a Gift card liability account. Add an other current liability account named Gift card liability (or similar) in your chart of accounts.
- Get the month's gift card totals. From your sales reports, total the gift cards sold and the gift cards redeemed (used as a payment) for the month.
- Book gift cards sold. Credit Gift card liability for the amount sold. The money came in through a card or cash tender, which you already debit to the clearing account, so this credit is what keeps the entry balanced.
- Book gift cards redeemed. Debit Gift card liability for the amount used as payment. The matching credit is the revenue of the class or product that was bought, which is already in your category totals.
- Check the balance. Liability balance at month end = opening balance + sold - redeemed. Compare it with your studio software's outstanding gift card report.
- Decide about expired or unused cards. Whether and when an unused balance becomes income depends on your state and your accountant. We do not give that advice; ask yours before you move anything.
Why this happens
A gift card is a promise to deliver a service later, so the cash is owed back as service until it is used. Booking it as income on the day of sale overstates that month and understates the next.
When the manual way is not enough
The common slip is leaving gift card sales out of the entry, which makes the entry not balance because the cash side includes them. See the clearing-account example in the month-end walkthrough.
The faster path: Studio Month-End gives gift card sold and redeemed their own mapped lines, so the liability moves every month without you adding it up. Free covers one studio and one month's import file download, ever; Studio is $19/mo and Bookkeeper is $59/mo for up to 15 studios. Your export is read in your browser and never uploaded. Try it free, or see pricing.