Gift cards are the most commonly mis-booked tender in hospitality. Sold cards are cash today, revenue never — they're a liability until redeemed. Redeemed cards are revenue recognition with no cash movement. Most bookkeepers either double-count or drop them entirely.
The four entries that matter
- Sale: Debit Cash, Credit Gift Card Liability. Not revenue. (In most states you also owe sales tax at redemption, not sale — check your state.)
- Redemption: Debit Gift Card Liability, Credit Revenue. No cash. This is why a redeemed card never shows up in your deposit, and why "deposits are short" panics on gift-heavy days are false alarms.
- Breakage: Cards never redeemed. Recognized as revenue only when redemption becomes remote (state rules vary; Virginia lets you recognize after a defined dormancy period, and escheatment applies).
- Fees/promos: Bonus cards (buy $100, get $20) split the liability between cash-funded and promotional-funded portions.
The tell-tale sign your gift card accounting is broken
Your Gift Card Liability balance doesn't shrink when cards are redeemed, or your deposit variance spikes every December-February (gift season) with no explanation. Both mean redemptions aren't being classified as liability draws — so they're being reconciled as missing cash.
Automated reconciliation fixes this by class: gift tenders are excluded from deposit expectation entirely and journaled to liability accounts, so the deposit match stays clean 365 days a year.
See the other five causes of deposit mismatches →
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