RMS should record gift card sales as liabilities, not sales.

RMs currently records gift cards sales as sales, not liabilities. If a merchant sells a $25.00 gift card, and that card is redeemed the same day for $25.00 in merchandise, it is erroneously reported on the Z report (and subsequent sales reports) as $50.00 in sales. This throws off the sales figures, the margin report, and causes the business to overstate its revenue, and pay more in taxes, if not corrected.

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Reply to
Ron R.
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It does make the Z-report erroneous and definately it should be handled differently.

However, you shouldn't be using RMS for official revenue reporting. That's where a connection to an accounting package comes into play. If you setup your GL accounts properly when connecting to Quickbooks (or others) you will be fine.

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Reply to
root

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Reply to
Ron R.

How else do we know our revenue if not from our POS? Does this issue only effect Z reports or is it true in sales summary reports as well?

Reply to
Dan Rishworth

It can be argued whether the Gift Card is a sale orNot. As far as I am concerned it is a sale and the tax liablities are due when the item is sold. However, what needs to happen is that when it is redeemed against another item that item sale must not show as sale. So we have created a Custom Report that Calibrates the sales report and reduces the sales of that day by the amount of gift certificate redeemed. This will cause the revenue reporing to be correct and consistant.

the reason for the Gift Card being considerred a sales is that you will not re-imburse a Gift Card value so in all practical purposes the sales has happened and you are using that item as an exchange when you pay it by Gift Card.

Only other way would be for RMS to carry a notion of a Deposit Ledger which it does not.

Afshin Alikhani - [ snipped-for-privacy@retailrealm.co.uk] CEO - Retail Realm

Reply to
Afshin Alikhani

Actually, it is not arguable. Our top CPA consultant has made it clear that under FASB rules, a gift card must be recorded as a liability until it is redeemed completely. Recording it any other way would be false. If you were providing this to a bank or, God forbid, investors, it would be fraud. You can not accept sales tax on a gift card until it is redeemed. To avoid having liabilities float forever, there needs to be a time limit on the cards. Different states have laws on this so the business should consult a CPA on this matter.

Chris LaCroix CTO POSable Solutions

"Afsh> It can be argued whether the Gift Card is a sale orNot. As far as I am

Reply to
POSable Solutions

I agree with Chris. When a merchant files the monthly sales tax form, he does not pay tax on gift cards, since no tax has been collected. He pays the tax only on the merchandise sold when the card has been redeemed.

In a way, gift cards are like layaways. Say that a merchant sells a $400 suit on layaway. The customer gives a $50 deposit, and continues to make payments until the suit is paid for. Only when the last payment is received, and the goods delivered, will the sale be deemed to have been made.

I would like to see a l> Actually, it is not arguable. Our top CPA consultant has made it clear that

Reply to
Ron R.

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Reply to
Mark S

I understand completely, but they must do some sort of basic accounting where the values can be properly represented... Aside form that, you can customize the RMS reports to display the information in a more accurate way.

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Reply to
root

I'm just saying that given this flaw and some other rounding issues in RMS the reports that are run in the system can be erroneous and inconsistent.

The Z Reports and sales reports have the voucher issue (topic at hand ) and the sales reports have rounding issues, when compared to Z reports give inconsistent totals by small amounts.. Therefore, OFFICIAL reporting should be done after interpreting these values into your Accounting system whether it be a computer program like QuickBooks or hand written.

Reply to
root

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Reply to
POSable Solutions

why on earth should people have to customise RMS to do something it already SHOULD do? I learnt that gift certificates are liabilities in Accounting

101...

"root" wrote:

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Reply to
ozzie

I agree with Mark. Set up a separate department for gift cards. If you are integrating with quickbooks, then you can map those sales to a liability account. If you aren't integrating with quickbooks, then just memorize your sales reports to filter out gift card sales.

No customization is needed. Since RMS is not a general ledger program, it doesn't matter if it captures them as sales. What matters is how you transfer, or enter, your data into your accounting system.

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Reply to
Greg Williams

right, I always seem to forget that many in here need everything explained to the smallest detail... I'm sure you already read the post by Mark S, he nailed it.

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Reply to
root

Not to mention some states consider the sale of a Gift Card *see Sale in Webster's* as a sale. So it is 6 or half a dozen, depending upon where you live.

A Z report is for drawer balance only. mt

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Reply to
Masta T

Reply to
Peter Johnson

No. If gift card/voucher is going to be a special kind of transaction - and basic accounting principles tell us it is - why do we need to fudge around with storeops to get it to work correctly? Shouldn't store ops create it such that it is a special kind of transaction from the get go? It is halfway there, but why can't it be created already as a default (special) item/dept etc in storeops?

That would be much better, especially c> right, I always seem to forget that many in here need everything explained

Reply to
ozzie

Sorry for the late post.

Most companies do not follow GAAP as promulgated by FASB. FASB does not create laws. However, all US companies are subject to the income tax code. As such the determination of the treatment of gift cards is determined by the taxpayers method of accounting.(Cash vs Accrual, generally) So technically a cash basis taxpayer should report the gift card receipts as income, and an accrual basis taxpayer would normally report them as a liability. There are exceptions, and depending on the level of sales, it is possible to keep the accounting records on the accrual basis and convert them to cash basis to prepare the tax return. In general for most companies the IRS rules trump FASB rules. They certainly have more bite.

Financial statements compiled by a CPA on the cash basis have a statement identifying the basis of accounting being used by the client. If cash basis the statements also state that they do not conform to GAAP, (cash basis is not a GAAP method) and the user of the statement's need to be familiar with the basis being used to be able to perform any reasonable analysis. If it's been disclosed, no fraud.

States do have different laws regarding layaways and customer deposits and how when they are subject to sales tax and what happens when the funds have been forfeited. Some require the forfieted funds to actually be sent to the state with the customer's name.

I hope the is more clear.

Michael McCormick, CPA

"POSable Soluti> Actually, it is not arguable. Our top CPA consultant has made it clear that

Reply to
Mike McCormick

It might be a little late but I thought you might be interested in this.

We treat our gift cards as products therefore when we sell them it is a sale and we record our GST (tax) at that point. The gift cards that we sell can be used in store or in another member store. Therefore we dont have a liability to that card once it is sold. Whn they are redeemed it is treated like a stock return on our books but is processed as a tender amount.

We may sell 30 gift cards a week and only ever get back 3 a week as people wil take them to other participating stores. It would be silly of us to hold those gift cards as liabilities to us.

Steve

"Peter Johns> MT:

Reply to
S Goldsmith

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