Journal entry for issuing Gift vouchers
This query is : Resolved
28 November 2009
How to post the journal entry/voucher when the company issues any Gift Vouchers for free to somebody. The gift vouchers will be redeemed later while sales. How to post JV while issuing the Gift voucher and while redeeming it.
01 December 2009
Can anybody help me in this regard. I have a doubt that on which ledger (exact ledger name as per the standard) the amount shoule be posted? Waiting for any valuable inputs. Thanks in advance
02 August 2024
When a company issues gift vouchers, the accounting treatment involves two key stages: issuing the vouchers and redeeming them. Here’s a detailed guide on how to post these transactions:
### **1. Issuing Gift Vouchers**
When you issue gift vouchers, you are essentially creating a liability because the company has a future obligation to provide goods or services when the voucher is redeemed. You also need to account for the expense associated with issuing these vouchers.
**Journal Entry at the Time of Issuing Gift Vouchers:**
**Example: Issuing Gift Vouchers worth ₹10,000**
**Journal Entry:**
```
Date Account Debit Credit
-------------------------------------------------------------
XX.XX.XX Gift Voucher Expense 10,000
To Gift Vouchers Payable (Liability) 10,000
```
**Explanation:**
- **Gift Voucher Expense:** Represents the cost or expense incurred in issuing the vouchers. This account is an expense account.
- **Gift Vouchers Payable:** A liability account that reflects the company’s obligation to provide goods or services when the voucher is redeemed.
### **2. Redeeming Gift Vouchers**
When a gift voucher is redeemed, you need to adjust the liability account and recognize the revenue or sales. You also need to account for the value of the goods or services provided.
**Journal Entry at the Time of Redeeming Gift Vouchers:**
**Example: Voucher redeemed for goods worth ₹8,000**
**Journal Entry:**
```
Date Account Debit Credit
-------------------------------------------------------------
XX.XX.XX Gift Vouchers Payable 8,000
To Sales Revenue 8,000
XX.XX.XX Cost of Goods Sold 8,000
To Inventory 8,000
```
**Explanation:**
- **Gift Vouchers Payable:** This account is debited to reduce the liability because the voucher has been redeemed.
- **Sales Revenue:** This account is credited to recognize the revenue from the sale of goods or services.
- **Cost of Goods Sold (COGS):** Represents the cost of the goods or services provided, which is debited.
- **Inventory:** This account is credited to reduce the inventory as the goods are now sold.
### **Summary:**
- **Issuing Gift Vouchers:**
- Debit **Gift Voucher Expense** (Expense Account)
- Credit **Gift Vouchers Payable** (Liability Account)
- **Redeeming Gift Vouchers:**
- Debit **Gift Vouchers Payable** (Liability Account)
- Credit **Sales Revenue** (Revenue Account)
- Debit **Cost of Goods Sold** (Expense Account)
- Credit **Inventory** (Asset Account)
By following these entries, you accurately reflect the financial impact of issuing and redeeming gift vouchers in your accounting records.
### **1. Issuing Gift Vouchers**
When you issue gift vouchers, you are essentially creating a liability because the company has a future obligation to provide goods or services when the voucher is redeemed. You also need to account for the expense associated with issuing these vouchers.
**Journal Entry at the Time of Issuing Gift Vouchers:**
**Example: Issuing Gift Vouchers worth ₹10,000**
**Journal Entry:**
```
Date Account Debit Credit
-------------------------------------------------------------
XX.XX.XX Gift Voucher Expense 10,000
To Gift Vouchers Payable (Liability) 10,000
```
**Explanation:**
- **Gift Voucher Expense:** Represents the cost or expense incurred in issuing the vouchers. This account is an expense account.
- **Gift Vouchers Payable:** A liability account that reflects the company’s obligation to provide goods or services when the voucher is redeemed.
### **2. Redeeming Gift Vouchers**
When a gift voucher is redeemed, you need to adjust the liability account and recognize the revenue or sales. You also need to account for the value of the goods or services provided.
**Journal Entry at the Time of Redeeming Gift Vouchers:**
**Example: Voucher redeemed for goods worth ₹8,000**
**Journal Entry:**
```
Date Account Debit Credit
-------------------------------------------------------------
XX.XX.XX Gift Vouchers Payable 8,000
To Sales Revenue 8,000
XX.XX.XX Cost of Goods Sold 8,000
To Inventory 8,000
```
**Explanation:**
- **Gift Vouchers Payable:** This account is debited to reduce the liability because the voucher has been redeemed.
- **Sales Revenue:** This account is credited to recognize the revenue from the sale of goods or services.
- **Cost of Goods Sold (COGS):** Represents the cost of the goods or services provided, which is debited.
- **Inventory:** This account is credited to reduce the inventory as the goods are now sold.
### **Summary:**
- **Issuing Gift Vouchers:**
- Debit **Gift Voucher Expense** (Expense Account)
- Credit **Gift Vouchers Payable** (Liability Account)
- **Redeeming Gift Vouchers:**
- Debit **Gift Vouchers Payable** (Liability Account)
- Credit **Sales Revenue** (Revenue Account)
- Debit **Cost of Goods Sold** (Expense Account)
- Credit **Inventory** (Asset Account)
By following these entries, you accurately reflect the financial impact of issuing and redeeming gift vouchers in your accounting records.
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