Setup and Settings

Accounting for Gift Vouchers - Xero

This article explains best practice for accounting for gift vouchers.

Overview

Gift Voucher (or Gift Card) sales are treated differently to typical product sales. A Gift Voucher, when issued, should create a liability until the time at which it is redeemed.

As a result, there are a few small changes required in Cin7. In your accounting software there will be a few processes that you should follow to make sure information passed from Cin7 is accounted for correctly. This article explains in detail the process of accounting for vouchers issued and redeemed.

This article applies specifically to POS v3 - which has updated Gift Voucher settings. If you use Gift Vouchers and are currently using POS v2, we strongly recommend upgrading. See this blog for more information.

Accounting for Gift Vouchers Issued

Setup

In most jurisdictions, you should not collect GST or VAT upon issue of Gift Vouchers. Secondly, revenue created when a gift voucher is sold must be entered to a liability account in your accounting software.

To make sure gift voucher sales are set up correctly, you first need to create an alternative GL Account that does two things:

• Removes any tax at time of sale.
• Writes the sale to a liability account in your accounting software.

To set this up:

1. Log in as an administrator.
2. Click on your username, top right, and click on Settings.
3. Click on Alternative GL Accounts, from the Accounting menu.
4. Click Add New.
5. Enter the following into the fields provided:
   

   Field	Entry
   Name	Gift Liability
   Account Number	1234 - i.e. the liability account in which the value should appear.
   Cogs	Leave blank
   Tracking Categories Name	Leave blank
   Tracking Categories Option	Leave blank
   Xero Tax Types Codes	The tax code for your region, see Xero's article. Typically: Australia: BASEXCLUDED NZ/US/UK/ROW: NONE
   Purchases or Sales	Sales
   Tax Rate	0

6. Click Insert.

Finally, now the alternative GL Account has been created, you will need to apply this to the Gift Voucher product in the Products module.

To do this:

1. Create a Gift Voucher Product, if you haven't done so already.
2. Switch on the additional Accounting fields in the Product Settings, if you haven't done so already.
3. Find the Gift Voucher product from the Products list and click on the product name.
4. From the Accounting section, select the Alternative GL Account you have just created from the Sales Account drop-down.
5. Click Save and Close.

Please note that you will have to sync the settings in the POS for the tax rate to appear correctly.

Accounting

When Registers are closed at the end of each day, a 'batch' is created for each payment type. This batch is imported to your accounting software as a draft invoice. For more detailed information about this, see Closing the Register.

If a Gift Voucher is sold and paid for using - for example - "Card" payment type, the Card batch will be split into typically two line items: total of product sales, which will go to the default revenue account, and the total of Gift Voucher sales which will be split off (due to the Alternative GL Account) into the assigned liability account.

This batch will be reconciled as usual against the related payment in your Bank feed.

Accounting for Gift Vouchers Redeemed

Upon redemption of a Gift Voucher, POS users will select the payment type Gift Voucher. At the end of each day, this will create a batch for all Gift Vouchers redeemed that day.

If you have used an Alternative GL Account named 'Gift Liability' then when importing the batch, it will debit your Liability account, and credit your sales revenue account automatically.

FAQs