USA Accounting for free service

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I have a gift certificate here with a value of $150.00. My company is an Automotive shop and it made this gift certificate as one of the prizes to a raffle draw. The person who won this prize came to the shop and work was done for this value. I am not sure how to account for this. Its a kind of donation but if I am debiting donation expense what am I crediting? Hoping to hear from you guys. Kind Regards. Walter
 

kirby

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Not a donation as that term belongs to money sent to a charity. If you do not want to open a new specific expense account try "advertising expense".

When you look at the situation, you did not incur EXTRA expense. It was just that the labor of some folks was incurred and there was no invoice for the revenue. So if you wish to recognize the "gift certificate expense" then DR your new "gift certificate" expense account and CR a new account set up next to salaries expense, called ""Wages offset" to reduce gross wages.

If you do this gift certificate thing rarely I personally would not make this adjustment for practical purposes.
 
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Not a donation as that term belongs to money sent to a charity. If you do not want to open a new specific expense account try "advertising expense".

When you look at the situation, you did not incur EXTRA expense. It was just that the labor of some folks was incurred and there was no invoice for the revenue. So if you wish to recognize the "gift certificate expense" then DR your new "gift certificate" expense account and CR a new account set up next to salaries expense, called ""Wages offset" to reduce gross wages.

If you do this gift certificate thing rarely I personally would not make this adjustment for practical purposes.
Thank you very much Kirby. Your explanation is very clear and helpful. Thanks also for the quick response.
 

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