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Issue of gift vouchers - VAT and Rev Recognition

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Hi Everyone,

I seem to be going round in circles with myself and wonder if I could get some help on double entry on the above subject.

I have a client that owns a resturant that is VAT registered. They sell gift vouchers with a 12 month expiry date on them. All of their sales are standard rated, no cold take out etc. And the only place of supply is at this particular resturant.

My understanding is that the sale of these gift vouchers would be classed as a single purchase voucher, therefore VAT payable at point of sale, not redemption. As the VAT chargeable on the ultimate supply can be identified or ‘fixed’ at the time the voucher is issued.

But then the revenue will be accounted for on redemption. 

I am struggling on the double entry when the bill in the restuant is to be settled. If I can put down below what I have so far:

Point of sale (eg £40 gift voucher)

CR Sales           33.33

CR VAT            6.67

DR Bank 40.00

DR Sales 33.33

CR Deferred Income 33.33

 

But I need to show that there is a £40 gift card that will be used against a sale in the future so I need to:

CR Gift Card Holding Account (balance sheet) £40

DR ??? I just cannot think where to debit this £40.

Redemption of the gift card

DR Gift card holding account £40

CR Sales ledger control £40 - to reduce the amount due on their bill

CR Revenue £33.33

DR Deferred income 33.33

 

So I am just stuck as to what the mysterious £40 CR should be when recognising the gift card and then where I reverse it out on redemption. What isn't sitting right with me is that there is a CR to deferred income and a CR to gift card holding at point of sale, so I have a double liability right now so I need this DR to level things out - it is just what is it? 

I may be missing something so very obvious, apologies if it is, but I would really appreciate if someone could take a glance over this.

Thanks so much.

Kelly

Replies (9)

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By johnt27
06th Nov 2019 15:33

I think you've overcomplicated matters.

Double entry on purchase of voucher:
DR Cash £40
CR VAT £6.67
CR Voucher control £33.33

On redemption:
DR Voucher control £33.33
CR Sales £33.33

I think if the voucher lapses I'd be tempted to record the subsequent credit in other income rather than sales, but you need robust record keeping to keep on top of this. On the VAT it sounds right - definitely not my speciality.

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Replying to johnt27:
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By k3lly89
07th Nov 2019 08:30

Thanks for your reply johnt27, much appreciated.

My issue is that I am then left with a balance of the total days takings on the SLCA. The system used is Xero so each day the till system sends through the days takings as one invoice. The till system then allocates what was taken card and cash, and then I have to manually clear off gift vouchers used to bring the outstanding balance to zero.

This is why I need the £40 voucher value somewhere in the balance sheet to use, as I need 'pay' £40 off of that days takings as a gift card tender. This is where I am stuck.

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Replying to k3lly89:
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By johnt27
07th Nov 2019 13:59

Not sure what system you are using but often this can be dealt with by changing the recording of takings either in the POS system or the integration transfer.

If total takings for a day are say £1,200 of which £40 is vouchers. The double entry should run like this:
DR Debtors £1,200
CR VAT £200
CR Voucher control £33.33
CR Sales £966.67

Then when you record the cash and card takings these all come off debtors and pass through till cash, petty cash, bank, credit card control or however you have this side of things set up.

So you should never have £40 in debtors left to clear.

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Replying to johnt27:
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By k3lly89
11th Nov 2019 07:51

I am using Xero.

So I understand what you have put above. But then the next issue is redemption.

The till system sends a summary to Xero each day, which creates a daily invoice. And off of that comes the card and cash tenders, as per what is fed into the till system.

Say on that same day, someone settled part of that bill with their £40 gift card, how do I then clear £40 off as a tender? Forgetting the sale now as the sale has been dealt with.

I have CR's from the card control account and the cash control account, but where is my £40 gift card and the associated control account to be able to reduce this daily takings invoice down to nil?

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By paul.benny
06th Nov 2019 17:12

Agree with johnt27.

One wrinkle, though: on redemption, care is needed to avoid double-counting VAT.

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Replying to paul.benny:
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By k3lly89
07th Nov 2019 08:27

Hi paul.benny

Thanks for your reply. My issue has an extra layer in it though as I need to be able to take £40 off of my SLCA on redemption, not just recognise the revenue. Please see the above reply for hopefully a better explanation :)

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Replying to k3lly89:
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By paul.benny
07th Nov 2019 13:52

A bit difficult to draw lots of T accounts on here - if you PM your email address, I'll send you a brief spreadsheet.

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By JoF
06th Nov 2019 18:56

Agree with both John and Paul, especially the word of warning from Paul.

Your till/z reports can be arranged to take care of that with any luck, then its just ensuring the staff do things properly.

Thanks (1)
Replying to JoF:
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By k3lly89
07th Nov 2019 08:55

Thanks for reply JoF.

I have an added issue, please see above.

Completely agree with regards to ensuring staff do things properly. At the moment they are card payments are being processed as cash and vice versa, so all of the control accounts are running out because the data feed is wrong due to user error. It is going to take a little while to sort through!

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