Accounting for gift vouchers in Xero

Accounting for gift vouchers in Xero

Overview

Find out how to account for gift vouchers in Xero.

Gift vouchers are a special product with an exchange value. They’re returned in lieu of payment for future sales.

For example, say you sell a gift voucher with a $25 exchange value. The customer who bought the gift voucher (or whoever they gave the gift voucher to) then has the right to exchange the gift voucher for $25 worth of goods.

Therefore, from an accounting perspective, gift vouchers liabilities until they’re redeemed – that is, you owe goods to someone.

So that (a) your liabilities (not sales) are credited for the sale of gift vouchers and (b) your liabilities (not receivables) are debited when gift vouchers are redeemed, you must:

  • Set up a special alternative general ledger (GL) account and assign it to your gift voucher product.

  • Always batch sales orders paid for with gift vouchers.

Set up accounting for gift vouchers

Before setting up accounting for gift vouchers, you must have created a gift voucher product and chosen or created a liability account for gift vouchers in your Xero chart of accounts.

Now, to set up accounting for gift vouchers, enable the product accounting settings:

  1. Log in to Cin7 Omni as an administrator.

  2. From the navigation, open Products.

  3. Open Settings.

  4. Set Accounting to Yes.

  5. Select Save.

Next find the Account Code and Tax Type of your liability account for gift vouchers:

  1. From the Accounting menu in the navigation, open your Xero integration.

  2. Open the Admin > Chart of Accounts tab.

  3. Find the account and note its Account Code and Tax Type.

Create the alternative general ledger (GL) account for your gift voucher product:

  1. From the user menu, open Settings.

  2. Under Accounting, open Alternative GL Accounts.

  3. Select Add New.

  4. Enter these details (leave other details blank or as the default):

    • Name: Gift Liability

    • Account Number: the liability account’s Account Code

    • Tax Rate Code: the liability account’s Tax Type

    • Purchase or Sales: Sales

    • Tax Rate: 0

  5. Select Insert.

Finally, assign the alternative GL account to your gift voucher product:

  1. From the navigation, open Products.

  2. Find and open your gift voucher product.

  3. Under Accounting, set Sales Account to Gift Vouchers (or whatever you named the alternative GL account).

  4. Select Save and Close.

After setting up accounting for gift vouchers, sync your POS.

Accounting for gift vouchers

Here’s what now happens when gift vouchers are sold and redeemed:

  1. You sell a gift voucher via POS. The customer pays with cash. You close the register (batching the sales order).

  2. You sync the cash batch to your accounting software. Because you’ve assigned the Gift Liability alternative GL account to the gift voucher product, the value of the gift voucher is credited to the liability account for gift vouchers (not sales).

  3. You sell other goods via POS. The customer pays with the gift voucher. You close the register (batching the sales order). Because the payment method of the batch is gift voucher, Cin7 Omni has automatically added a special line item to the batch. That line item has:

    • -1 quantity (Qty)

    • An Amount equal to the Total of the batch

    • Your alternative GL account for gift vouchers for Account

  4. You sync the gift voucher batch to your accounting software. Because of the special line item, the value of the batch is debited from liabilities (and because the Total of the batch is 0, nothing is debited from receivables).

Find your monthly net liability

Your monthly net liabilities for gift vouchers are shown on the Retail > Gift Voucher tab on your Xero integration dashboard.

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