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How do you account for GIFT VOUCHERS?

Issue of gift vouchers - VAT and Rev Recognition

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 I seem to be going round in circles with my team and wonder if I could get some help on double entry on the subject of Gift Voucher.

Under EU regulation from 2019 we established that our voucher qualifies as single-purpose vouchers (goods, single Rate of VAT, to be used in one redemption online)

As a result the VAT is should be due when the voucher is issued. (and not when the sales is recognised)

 

£120 gift voucher as example

Journal 1: Process the sales Invoice

CR Sales           100

CR VAT            20

DT Debtor Ctrl Acct 120

 

Journal 2: Process the Payment of the gift

CR Debtor Ctrl Acct 120

DT Bank 120

Journal 3: Enter the liability Non claimed voucher to the Balance sheet

DT Sales (P&L) 100

CR Gift card Liability (B/S) 100

 

Journal 4: Voucher gets redeemed (3 month later for example), a sale order is created but not invoiced.

CR Sales (P&L) 100

DT Gift card Liability (B/S) 100

 

Journal 5: Process the cogs of the order

DT COGS P&L: 50

CT STOCK (B/S): 50

 

Does that make sense? or are we going the wrong way about this.

Thanks

 

 

 

Replies (4)

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By the_drookit_dug
20th Nov 2020 16:53

The COS journal (5) looks fine.

For the others, why not just:

1) Sale of voucher:
DR Bank £120
CR VAT £20
CR Gift Card Liability £100

2) Redemption of voucher:
DR Gift Card Liability £100
CR Sales £100

Thanks (1)
avatar
By Softty
20th Nov 2020 17:05

Thank you so much for your answer.
The problem we have is the automation of our systems. A sales invoice is automatically created, so therefore we need to clear the Debtor side.

At least sound like you agree we do have to recognize VAT at purchase of the gift.

Thanks (0)
Replying to Softty:
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By the_drookit_dug
20th Nov 2020 17:10

Ah, okay. Your journal hokey-cokey looks fine then

Thanks (1)
Replying to Softty:
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By paulwakefield1
21st Nov 2020 08:56

Quote:

At least sound like you agree we do have to recognize VAT at purchase of the gift.

Agreed as it is single purpose.

Thanks (2)
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