Dealing with gift certificates that are given as a donation

Question

Our company often gives gift certificates to non-profit groups for them to sell at raffles or auctions. I'm wondering how enter these transactions. 
 I have three accounts 
 1150 Gift Certificates Redeemed 
 1250 Gift Certificates Sold 
 5050 Donations. 
 I'm assuming that when a donated Gift certifcate is brought in, I should debit Donations, but I'm not sure what account to credit, nor am I sure if I should enter the Gift Certificate when it's initially given out. 
 If I credit 1250 - Gift Certificates sold when I give away a Gift Certificate as a donation, how do I handle it if the gift certificate is never brought in? Is it still a donation? 
 Thanks!

Smith and Co · Accepted Answer

Think of Gift Certificates as cash WHEN they are redeemed - before they are redeemed then it is treated similar to a prepaid deposit. There is no revenue until the GC is redeemed. 
 I am going to assume you are numbering the GC to prevent fraudulent use and that there is an expiry date on the GCs. 
 When giving away GCs then post as a JE giving the name of outfit GC is donated to, GC number, and date given to group. You would be crediting a liability account called something like 2300 Gift Certificates and debiting an expense account called Donation. 
 When the GC is redeemed you would enter the items purchased as a sales invoice and payment would be using the 2300 Gift Certificate acct nbr as the 'bank'. 
 If you were to 'sell' a GC then entry would be to CR 2300 Gift Certificate and DR cash/chquing account. 
 When the GC is redeemed you would follow the same procedure as above. 
 At year-end you have a look at the 2300 Gift Cert account and decide whether any needs to be written off due to being past expiry date. In your case the JE for write-offs would be to DR 2300 and CR Donation expense. 
 Hope this helps!

Sage 50 Canada

Dealing with gift certificates that are given as a donation

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