That man is richest whose pleasures are the cheapest.
- Henry David Thoreau
Even after all the years I’ve worked at Sage, I occasionally still something asked of me that I haven’t seen before.
This week, a caller had a question about gift cards. As it happened, the establishment sells menswear, and many of the patrons are given gift cards with which they want to buy clothes.
This client had been struggling with a manual system, but now found themselves with a large amount of money in the gift card account, with no way of reconciling the balance in that account.
After some consideration, we came up with this one possible scenario for the store.
When a gift card is sold, a general journal entry is made, debiting the bank and crediting a 2000 series (liability) account. In my test samples, I gave the transaction a ‘source’ name something like ‘John Smith’ for the name of the card’s purchaser. I could have named it the number on the gift card, if that was easier to retrieve, of course.
In my test, I entered a gift card amount of $150.00.
I then entered a few other similar transactions, and took note of the balance on that account.
Next, I decided to buy a $400.00 suit, and use the $150.00 gift card to pay for part of it.
The transaction was fairly straightforward.
I made a sales invoice for $400.00. I then entered a line which said ‘Gift Card Redeemed’ and entered MINUS $150.00.
In the end, the sales account is credited $400.00, the gift card account is diminished by $150.00, and the net difference, $250.00, is debited the bank. Problem solved.
Fun accounting riddle: this often gets accountants, as well as regular people, confused.
Three men go out to dinner. The bill comes to $30, and they each pay $10. However, one man discovers a dirty plate and complains, so the waiter tells the owner of the restaurant, who gives the waiter $5 and instructs him to give it back to the men.
The waiter decides that you can’t split $5 three ways, and the men don’t know how much the owner gave him, so he instead gives each man $1 back, and pockets the difference. The men leave, satisfied.
The question is: the three men initially paid $30. They each got $1 back, so they only paid $27. The waiter has $2. $2 plus $27 equals $29. What happened to the other dollar?
Answer next post.