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Old 04-12-2003, 10:35 PM
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pippa pippa is offline
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Accounting for Discount Vouchers/Reward Cards

We have a reward card system in place where a customer will have the amount of the vouchers deducted from the total value of the sale. Is the following scenerio the best way to handle this thru Quickbooks?
  • Total value of sale rung thru till and then a discount for the value of the voucher applied
  • In QB under Sales Receipt enter the full value of the sale and then apply an discount item - which I have created called Vouchers
  • The item has a type of Discount but I have allocated the ACCOUNT to be Advertising - which is an expense as I want to claim back GST for the value of the discount, and the SALES TAX CODE pointing to NCG
My question is... Is this "kosher" to have Advertising as the account as QB gave me a warning that the nominated account was for expenses. It was the warning that made me wonder.

Thanks in anticipation
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Last edited by pippa; 04-12-2003 at 11:12 PM.
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Old 04-13-2003, 04:49 AM
gibbo gibbo is offline
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Gee, you find the good ones! The question is - how do you view the transaction.
Is it a disount? If it is, it will reduce your Sales and therefore reduce the GST payable on the Sale. In this case the code you would use is "GST" as it will reduce the GST payable on the sale of the item. (Not NCG, as it will show incorrectly on your Tax reports). In this case, you almost set it up right. Congratulations. Oh, forget the warning, QuickBooks isn't always right - after all it let you use the NCG tax code and that wasn't right!
Is it a Payment Method? If it is, the Sale is for the full value and the Vouchers are simply a way of paying for part of the item. In this case there is no reduction in the GST payable and the entire amount of the Vouchers is an expense to your Business. You would need to set up a Payment method called "Vouchers" linked to the expense account. As this is not possible from within Quickbooks, we again use a bit of wizardry to make it happen. Create the Payment method and link it to anything. Export the item list. Open it in Excel and change the Account to the expense Account you want to use. Close and save the IIF file. Import it back into QuickBooks. Done.
I guess you would prefer to have the GST on the Sale reduced, but I would suggest that you check out what the Tax Dept consider allowable. I really don't know. Post it onto the forum if you do get an anwer.
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Old 04-13-2003, 12:17 PM
plg plg is offline
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Nothing to do with your actual question, but I would add that sometimes vouchers, gift cards, gift certiicates, etc. should be shown as liabilities, or negative A/R, since these are commitments to redeem them for goods or services at some time in the future.
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Old 04-13-2003, 05:23 PM
gibbo gibbo is offline
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plg is correct. This relates to how such things as Gift Vouchers are sold and received back. As they are sold, they become a liability on your Business. When they are returned, they become a Payment Method and reduce the Liability that you have. Any GST liability is taaken on the actual item Sale, not on the Gift Voucher.
However, the Rewards system is a bit difficult. When Customers earn the rewards, they really create - at that time - a liability on your Business, for which no money is ever actually going to be received. Add to that the fact that some of these Rewards may never be used and it becomes a bit cumbersome. We are shortly to begin work with a POS for hairdressers. They frequently give Rewards to Customers. These do get used and come off transaction payments. In this case there is a good case for actually monitoring the amount of rewards that have been given out. These actually have an expiry date, so it is theotetically possible to monitor how much is outstanding at a particular time.
But for most of us, Rewards become an expense when they are actually tendered as payment for goods or services.
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Old 04-14-2003, 11:39 PM
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pippa pippa is offline
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Quote:
Originally posted by gibbo
I guess you would prefer to have the GST on the Sale reduced, but I would suggest that you check out what the Tax Dept consider allowable. I really don't know. Post it onto the forum if you do get an anwer.
Thanks for your invaluable advise here gibbo. Still working plucking up the courage to contact the ATO. My gut feeling is that they will not look favourably on this creative accounting but will certainly post back on the outcome.

Still more questions to ask... stay tuned
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