This posting addresses gift cards as liabilities.
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A gift card is a liability correct and an unearned income correct.
What happens if the gift card is never used and how long will it stay on the books as a liability?
What happens to the money that the organization has for unused gift cards?
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Solution Summary
The solution provides a discussion about gift cards, which is unearned income to the company.
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A gift card is definitely a liability. The gift card is considered unearned income until the gift card is redeemed by the recipient, at which time the company then recognizes the income. If the gift card is never used, the company takes the gift card liability off of the books. Usually the gift card states a specific time frame, such ...
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