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Botanical Spas sells $2,500 worth of gift certificates in November and December.25% of the gift certificates are redeemed in December prior to the December 31 year end.
-The entry to record the sale of the gift certificates is
A)Dr.Cash,Cr.Gift Card Revenue
B)Dr.Gift Card Revenue,Cr.Gift Card Liability
C)Dr.Prepaid Gift Cards,Cr.Gift Card Revenue
D)Dr.Cash,Cr.Gift Card Liability

Question

Quizplus · Accepted Answer

When gift certificates are sold, the company receives cash but owes a service or product in the future. Therefore, the correct entry is to debit Cash (increasing assets) and credit Gift Card Liability (increasing liabilities), reflecting the obligation to provide goods or services in the future.

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