Hi, if anyone can answer that would be great:

If a corporation has several stores and one of the store closes what happens to the gift cards, under the liability section? The gift cards can be redeemed at the other stores but what is the proper accounting g/l entry to zero out the balance on the balance sheet? Would it be:

Dr. gift card g/l acct
Cr. Misc income?

Again, the gift cards are still redeemable at the other stores.

Thanks!

Beauti92

I think an important question is what is happening to everything else with the store that is closing? The store which is closing does not have any income from the gift cards just because it's closing. It has earned anything.

What happened to everything else? i.e. the assets the closed store owned, the other liabilities it owes, etc. Whatever you are doing with them is probably the same thing that is happening to the gift cards. If there are other stores, somehow the other stores would be "taking on" these other accounts. There is more than one way that can be done.

But let's just over-simplify for a moment. The first thing that could conceivably happen is selling off any assets owned, paying off all bills they can, collecting all debts they can, etc. Those would be taken care of in a normal manner. Whatever is left over creates a net worth of the company, or "net assets." One of the other stores could be taking on the net assets of this company, and they could be taking on any assets or liabilities left over. This could include those gift cards, as it makes up the net worth of the closing store. (i.e. assets minus liabilities)

But there isn't one set answer to how this will be done. It depends on how the whole thing is being taken care of. And I also think this could be more complicated than you really want to try to deal with on here.