What happens when a customer uses a Square gift card?

[BTM2014]

I'm considering purchasing Square gift cards, but I would first like to know how a sale is recorded.  I understand that when I sell a gift card, I will receive the funds the next day, like any other sale, but how is the gift card recorded for book keeping?  I believe most businesses will record this as a liability and then clear it when the gift card is used by the customer.  Does Square track this liability ?  How should the sale be reported, when the gift card is sold, or when the customer uses it?

[Sineaid · Accepted solution]

Hi @BTM2014!

Thanks for reaching out to the Community to discuss this, it's great to have you here. Welcome!

I understand why it would be important to have clarity on the reporting aspect before getting started with Gift Cards.

The sale of a gift card is recorded separately from your product sales. For greater clarity on your liabilities, lets look at the impact of Gift Card sales and redemptions when considering key accounting terms:

• Gross Sales: Overall product sales in a period, including modifiers. This amount is not adjusted for refunds or discounts, and doesn’t include taxes and tips collected on a sale.Gross sales exclude the sale of a physical gift cards from Square, but include the sale of products tendered with your gift cards.
• Total Collected: Total amount collected from the customer. The total collected includes net product sales in a given period, tax, tip, Gift Card sales and other cash rounding adjustments collected from the customer.
• Net Sales: Gross sales amount less discounts and refunds. Net sales describe the overall product sales in a period, after the deduction of refunds and discounts. Net sales don’t reflect the sale of Gift Cards and does not include tax or tips collected.
• Net Total: Total collected amount minus fees. Net total reflects the amount collected from all of your operations after Square’s fees are deducted.

You can learn more about reporting and analytics for Gift Cards, here. If you have any questions after taking a look, just let me know!

I hope this helps!