USA Accrual for future liability

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Hi,

I belong to a bike club. Ride leaders get credits that they can redeem in the future for special bike clothing that the club purchases in advance. What would be the accounting entries to:
1. Register the liability related to the credits we owe?
2. Reduce the liability when the credits are redeemed?

Thank you
 

Steve-LevelUp

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Another way to look at this would be if you were dealing with gift cards. If you granted your ride leaders with a gift card that they could redeem, then you are incurring a liability at the moment of issuance. It would then be reversed once the card value is redeemed.
 
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Accrual accounting is simply saying that you have accrued an expense (or revenue), whether you expend (or receive) the cash or not. And, so, YES, depreciation is an accrued expense. You accrue it over the course of time you will depreciate the thing...
 

kirby

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Hi I see you asked for the acctg entries:

1. To register the liability to the ride leader. In this example let's say one ride was completed and you gave it a value of $20 to the ride leader

DR Ride Credits Expense $20
CR Ride Credits Liability $20
(To record ride leader liability to John Doe for ride across Death Valley on MM\DD\YY)

2. To reduce the liability at redemption. Let's say John Doe has completed enough rides to have $100 credit and obtains a shirt valued at $100 from your shirt inventory.

DR Ride Credits Liability $100
CR Inventory - Ride Shirts $100

Assumes when you buy the shirts say 10 for $100 that you record the$1,000 debit as "Inventory" (asset). If you instead expensed the shirts (Dr Shirts Expense) , then the credit in Entry 2 would go to CR Shirts Expense.
 

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