GDP numbers pushed even higher in Q3

[DKW 86 7,899]

Q3 Numbers were even better than reported before.

Yes the Economy is heating uop big time.

I hear where some merchants are not doing really well now.

Maybe gift certificates were bigger this year. Maybe we are just maturing on spending at Christmas.

Any comments?

[Tiger Al 0]

I've got a question. You said "Maybe gift certificates were bigger this year. Maybe we are just maturing on spending at Christmas."

I don't see your point on gift certificates. The ones I get have to be paid for up front, not when they're redeemed. So, if I buy a one hundred dollar gift certificate the store has made one hundred dollars, right???

[DKW 86 7,899]

no gcs arent considered sales.

[MDM4AU 338]

I have always understood that "inventory" needs to be moved before it counts, therefore GC's don't count.

[Tiger Al 0]

no gcs arent considered sales.

Then what are they considered? Why do I have to pay money for them?

[DKW 86 7,899]

I think they are credited as "income in lieu of purchases."

Some of you Acc people get into this.

They are not actually sales until they are run through the cash register with a sku/product number though.

[Tiger Al 0]

I think they are credited as "income in lieu of purchases."

Some of you Acc people get into this.

They are not actually sales until they are run through the cash register with a sku/product number though.

Then why don't they simply give me a plastic card with some arbitrary "value" assigned to it instead of making me pay $100 for a $100 gift certificate? Have I not purchased something? It's pre paid credit. When the card is redeemed they have lost nothing of value because it was already paid for, just not "claimed".

[War Eagle 96 10]

Then why don't they simply give me a plastic card with some arbitrary "value" assigned to it instead of making me pay $100 for a $100 gift certificate?

It's just easier to track that way. I think they have to account for the certificates, so if some are stolen they can recognize that no later than their next inventory, at least, it works for my company that way.

[Tiger Al 0]

Then why don't they simply give me a plastic card with some arbitrary "value" assigned to it instead of making me pay $100 for a $100 gift certificate?

It's just easier to track that way. I think they have to account for the certificates, so if some are stolen they can recognize that no later than their next inventory, at least, it works for my company that way.

So they do nothing with the money that was paid for the GC??? Or do they deposit it into their bank account and count it as a GC sale. A gift certificate isn't credit in the same sense as your VISA card is. It has been paid for, it is a sale.

[Tigermike 3,711]

So they do nothing with the money that was paid for the GC??? Or do they deposit it into their bank account and count it as a GC sale. A gift certificate isn't credit in the same sense as your VISA card is. It has been paid for, it is a sale.

Yep the money is theirs untill someone redeems the GC. But is not considered a sale untill "goods" are bought. Some places will even give cash for change rather than using the card down to the last penny.

[Tiger Al 0]

Mike, you HAVE bought a "good". It's called a gift certificate or gift card. Most stores nowadays have a credit card style gift card guaranteeing that the money spent on it remains in the store. No refunds. Return an item purchased with a GC and the money is credited to the GC account. No refunds. Don't like the store where the GC was purchased? Sorry. No refunds. It is a sale.

In fact, I'll bet you the stores don't even mind if tens of thousands of $$$ worth of sold GC's go unredeemed. They've already made their money when the GC was sold. And then they can still sell the merchandise in their stores to others and make even more.

[Tigermike 3,711]

Tell you what Al, YOU look at it any way you want. All that matters is how the IRS and the accountants look at it.

[Tiger Al 0]

Tell you what Al, YOU look at it any way you want. All that matters is how the IRS and the accountants look at it.

And how would they look at unreported income? I'm guessing that you're saying the stores wouldn't report the money taken at the cash register for the GC. That would then make it "unreported income", wouldn't it?

So if Macy's, Dillards, Target, etc. sold $500,000 worth of GC's they don't have to report the money actually paid to buy the GC's in the first place?

[TxWarEagle 3]

Apparently they dont have a problem with it.

[Tiger Al 0]

Apparently they dont have a problem with it.

How is it so apparent?

[TxWarEagle 3]

In most cases, "gift-card purchases don't account for sales until you actually redeem them," said Duker, of the International Council of Shopping Centers.

She said that although money is received by the retailer for the card purchase, that money "sits in limbo" in terms of accounting until the card is redeemed.

Limbo aint a dance

[Tigermike 3,711]

Look at the GC as a debit card. The money is available for you to use up to the limit of the GC. They will not let you spend more than the value of the card unless you take money out of your pocket.

Mike, you HAVE bought a "good". It's called a gift certificate or gift card.

No you have not bought a "good" when you buy the card. If that were so then there would be two sales, one when the card is bought and one when the "goods" are bought.

[Tiger Al 0]

In most cases, "gift-card purchases don't account for sales until you actually redeem them," said Duker, of the International Council of Shopping Centers.

She said that although money is received by the retailer for the card purchase, that money "sits in limbo" in terms of accounting until the card is redeemed.

Limbo aint a dance

I stand corrected!!! I think, in hindsight, I could've figured this out by thinking in terms of sales tax. You don't pay sales tax when you buy a gift card, only when you redeem it.

Please accept my apologies!!!

[CarolinaTiger 0]

not sure what all the fuss is over, but here's the "accounting" that takes place w/ a typical gift card "sale".

store receives cash...debits an ASSET ACCOUNT called CASH

store then credits some account akin to a LIABILITY ACCOUNT, because they are obligated now to provide goods & services in the amount of the said gift certificate at some point in the future (when the GC is used by the bearer).

it's not counted as a sale (in terms of accounting) at the time its purchased because nothing has been done to earn the revenue... no goods/services have been exchanged. the store earns that revenue when the GC is used to purchase good & services.

now note the impact on each financial statement when these transactions take place:

1) at the time of the purchase of the GC. ASSETS INCREASE and LIABILITIES INCREASE, but no income statement account is affected.

2) at the time the GC is used (for goods, let's say): (a) ASSETS DECREASE (a credit to some inventory account), EXPENSES INCREASE (a debit to Cost of Goods Sold) (the amount being the cost of the goods sold)... also, ( SALES REVENUES INCREASE (that's a credit for those of you keeping score at home) and LIABILITIES DECREASE (that's a debit...), in the amount of the sales transaction.

not until transaction #2 above does the income statement get affected directly.

any questions?

[Tiger Al 0]

I've got one!!! Is this an accounting nightmare or is there a pretty fluent system at work that makes it simpler than it may look???

[CarolinaTiger 0]

I've got one!!! Is this an accounting nightmare or is there a pretty fluent system at work that makes it simpler than it may look???

not really too big of a problem as far as the accounting goes, TA... just remember that you don't recognize revenues until they're earned... and in this case, they aren't earned simply because someone gave you $$.

note the flip side: waht if someone buys something on account (or on credit). now in that case, the revenue is recognized before the cash is received...exactly the opposite of the scenario being described here... cash receipt and revenue recognition frequently occur in different reporting periods.

now pension accounting...that's another story altogether...it is an accounting nightmare....

ct

[DKW 86 7,899]

CT... are you...you know...an Accounting Prof?

Say it aint so!!!!!!

[TxWarEagle 3]

Man..

It keeps getting more and more complicated...

[Ranger12 53]

My head hurts and my stomach is feeling a little queezy after reading all of that. :wacko: :confused:

[CarolinaTiger 0]

lol.

i am indeed an accounting prof.

couldn't you tell by how poorly i explained the process!