Gift Certificate Donations

by Shelley
(Waterloo, ON)

When a company donates gift certificates for services, are they only recorded if the certificate is ever used?

I know that when you sell a gift certificate you credit that to your gift certificate liability account and debit the bank account. Then when the certificate is used, you record the sale and taxes (credit) and off-set the payment to your gift certificate liability account (debit).

I just need some clarification on the donated gift certificates.

Thanks.

I asked around on this one and the consensus is that a gift certificate for services should only be recorded when the certificate is redeemed. You would do this with a credit to the sales account and a debit to the donations account.

However, a donation of TIME is not tax deductible. So, some have said that the transaction would not need to be recorded at all.

Does anyone else have an opinion on this one?