Advertising costs - The Book-keepers Forum

Advertising costs

I assume these are money off coupons? What kind of business is it and what kind of amounts are the coupons worth?

Yeah basically they are vouchers for the value of £10/£20 redeemable on goods in the shop.

It's a partnership and they are a butchers/Deli/Grocers.

They were handed out in order to get people in the shop and hopefully come back :)

Do the vouchers have a time limit?

FRS12 Provisions, contingent assets and contingent liabilities dictates that you must recognise a liability.

This is because a past obligating event (issueing the vouchers) has created a present obligation to honour the offer.

Think of it as though the company was printing its own money and now customers wish to spend it.

This needs to be recognised in the balance sheet at the amount likely to be redeemed over the duration of the offer period. Its a current liability in the balance sheet and a provision through the Profit & Loss.

Whilst 100% would be the obvious choice, where reasonable expectation of less than 100% take up can be reasonably argued then under UK GAAP one would be able to include a provision for less than the outstanding balance of the obligation providing that such gives a true and fair view of the entities affairs.

The actual printing of the vouchers would have been an advertising expense but the liability that they create would not.

I will leave it to those who are more expert at posting these things through Sage to advise which codes to use for each of the above.

kind regards,

Shaun.

Just read the follow up.

So your vouchers are actually creating someone elses liability rather than your own.

This makes you the equivalent of a print shop for other peoples businesses.

In that case the printed vouchers would have been sold to the shops so they would be sales and the printing costs cost of sales.

For the businesses that you sold to they should recognise the purchase of the vouchers as advertising costs but the liability that they create on issue is as per my first note.

Well notwithstanding what Shaun has said, and given that you state this is a partnership, I would be tempted to do like they do in Sainsburys should you give them a coupon. They ring the proper price up and then hit the 'money off' button. If the till does not have a money off' button, just ring in the cash received but collect the vouchers. In the accounts you could still credit sales with the total amount/ debit cash a/c and and debit discounts allowed a/c with value of coupons. Any other ideas?

Shamus wrote:

Just read the follow up.

So your vouchers are actually creating someone elses liability rather than your own.

This makes you the equivalent of a print shop for other peoples businesses.

In that case the printed vouchers would have been sold to the shops so they would be sales and the printing costs cost of sales.

For the businesses that you sold to they should recognise the purchase of the vouchers as advertising costs but the liability that they create on issue is as per my first note.

No we printed the vouchers for our own shop, the question is where to show these vouchers rather than sales which I think has just been answered above :)

Shaun...were you really answering questions on here at 2.30am?!!! All that study is no good for sleep patterns!

I would agree with Rob and Shaun

The cost of producing the vouchers is an advertising cost as you have said 6201

You should enter the full sales value

The redeemed voucher(s) I would enter as a discount allowed 4009, which will end up as a cost of sale. It will be deducted off the value of sales in Sage if you use a standard chart of accounts

Bill

RobH wrote:

Well notwithstanding what Shaun has said, and given that you state this is a partnership, I would be tempted to do like they do in Sainsburys should you give them a coupon. They ring the proper price up and then hit the 'money off' button. If the till does not have a money off' button, just ring in the cash received but collect the vouchers. In the accounts you could still credit sales with the total amount/ debit cash a/c and and debit discounts allowed a/c with value of coupons. Any other ideas?

At the moment I'm DR cash account with the Zreading amount (which includes voucher sales as they are rung through as cash) and then paying out of the cash a/c and debiting overrings a/c (8206) for the vouchers and overrings.

So you suggest a discount allowed account in the 4000 range (4009) and debit the vouchers there?

Wouldn't this then decrease the taxable profit?

Yes that is exactly what I would do. Yes it would decrease taxable profits but you have made less profit, try paying hmrc in vouchers, they'll have none of it! In effect you are having a sale, you are discounting your goods and therefore making a smaller margin.

I work in admin for a hospitality company and in our restaurant we receive vouchers for money off food. We don't use sage, its a tailored program for the business but the full sale is rung in the till then the discounts taken off rather than an over-ring which is then entered into our system as a discount.

Wendy

Brilliant I shall transfer all the vouchers from errors to discount allowed.

Thanks alot everyone your a great help.

Not been doing this long and although I can do a lot of it there are just some things that I can't see for looking :)

Ive done this before & Ive always used discounts allowed, thats what its there for. Dont know what I'd do without this code now. Manually I would still reduce the cost of sales, as this is what the vouchers mean.

So after talking to the owners it turns out they have been sold to the customers as gift vouchers so would the same thing apply,

Sale of voucher
Dr cash a/c
Cr sales

Redemption of voucher
DR cash a/c
Cr sales

Then
Cr cash a/c
Dr discounts allowed

Would that work?

Would that overstate sales? I think I would be tempted to open a separate 'Voucher sales' account.

On selling the voucher
Dr Cash
Cr Voucher Sales

Redemption of voucher
Dr Cash
Dr Voucher sales
Cr Sales

Think that works but not sure if it is the accepted way of doing things!

RobH wrote:

Would that overstate sales? I think I would be tempted to open a separate 'Voucher sales' account.

On selling the voucher
Dr Cash
Cr Voucher Sales

Redemption of voucher
Dr Cash
Dr Voucher sales
Cr Sales

Think that works but not sure if it is the accepted way of doing things!

To my mind your way would be the best way and it was how I wanted to do it, but they dont appear to have any record of how many of the vouchers they have sold.

As they don't appear to be too bothered about analysing sales then maybe a re-jig of your idea could work;

Vouchers have already been sold and analysed as sales so when redeemed

Dr cash a/c
Cr voucher sales a/c
Cr cash a/c
Dr voucher sales a/c

Hopefully that would satisfy all as there is no gain or loss from the exchange of goods for vouchers and there wouldn't be an issue with the tax man confuse

I think we all live for this type of problem.

I think I would investigate further as to how or if the "sale" of the vouchers was recorded anywhere, did they include a voucher sale in the takings along with other sales?

The problem I see, is that every voucher sold, creates a liability, so out there somewhere are an unknown number of creditors.

The vouchers aren't recognised as a sale until they are redeemed (Shaun might want to confirm that), so when issued, they would be DR Cash/Bank, CR Creditors (Sage 210x range), when they are redeemed the DR Cash/ Bank (less Voucher), DR Creditor (Voucher value) CR Sales (Full sales value)

But that will all depend on what happened to the money received when the vouchers were first issued. Maybe a little more probing is required

Bill

I have had an additional thought, on at least how it might be possible to calculate the amount of money received from the vouchers.

Presumably a certain number were printed and there will some left un-issued. Is it possible to find out how many are left and deduct from the amount originally printed?

Bill

Wella wrote:

I think we all live for this type of problem.

I think I would investigate further as to how or if the "sale" of the vouchers was recorded anywhere, did they include a voucher sale in the takings along with other sales?

The problem I see, is that every voucher sold, creates a liability, so out there somewhere are an unknown number of creditors.

The vouchers aren't recognised as a sale until they are redeemed (Shaun might want to confirm that), so when issued, they would be DR Cash/Bank, CR Creditors (Sage 210x range), when they are redeemed the DR Cash/ Bank (less Voucher), DR Creditor (Voucher value) CR Sales (Full sales value)

But that will all depend on what happened to the money received when the vouchers were first issued. Maybe a little more probing is required

Bill

Lol my head is officially in my hands and I'm close to tears wink

At least it's good experience as that is all I'm doing it for rather than wages smile

This after much thought has opened a wee can of worms so if it's ok I'd like to clarify a few points which I think I've made an error on.

When inputting the cash taken I take the Z reading and;

Dr cash a/c
Cr sales a/c

The Z reading assumes that any over-rings/errors are sales as these aren't sorted out at the time, instead the receipt has over-ring written on it and put in the till.

I then

Cr cash a/c
Dr cash till discrepancies (8206)

My qeustion here is will this decrease the amount of profit at any point? I feel it should do as they weren't actually sales and in my trainee mind and not understanding the full process I can't see where this would be deducted from the profit, unless I Dr the sales a/c with the over-rings or create an account in the same range to show discrepancies.

Back to vouchers, aww

, As it stands I have so far,

Dr cash a/c with the full Z reading
Cr sales with full Zreading
Cr cash account for the value of vouchers,
Dr errors discrepancies with the vouchers (8206 as we didn't know what to do with them smile

)

From what I can see from what your suggesting I should find the value of vouchers sold and move them from sales to 2102 Cr( and rename it vouchers), which in effect decreases my sales a/c by the value of the vouchers.

Take the value of vouchers redeemed (which at the moment are sitting in 8206 Dr) and move them to the vouchers a/c Dr through a journal entry then maybe it should be fine as the sales a/c should already show the value as a sale as the value was never taken from sales in the first place.

I hope and pray someone can make sense of that and point out where/if I'm going wrong.

Thanks for reading wink

I think we are getting closer to the solution.

I also think I understood what you have done, so here goes with my solution (and reasoning)

Your first point is correct, the profit will be lower (8206 is in the general expenses of the overheads in the Chart of Accounts) and the amount of cash will be adjusted to reflect what was really taken in cash. But profit shouldn't be reduced.

If you can find the value of the vouchers that have been issued (I'll use issued rather than sold because it is less confusing) do a journal entry DR Sale and CR (new) Vouchers (2102) that should correct the Sales and Creditor values.

As you have said Dr Vouchers (2102) and Cr Discrepancies (8206) that will lower the amount of creditors by the value of the redeemed vouchers and will remove the misposted expense.

That should put you to where you should be and the P&L account will show the correct profit and the Balance Sheet will show the correct Creditor value

If its possible set a till code that doesn't add to Sales so in future when a voucher is issued it can be identified and posted to DR Cash or Bank and CR Vouchers. It may be that a note of the vouchers sold and a manual adjustment will have to be made, if the till can't be programmed.

When a voucher is redeemed Dr Vouchers, Dr Cash/Bank (the balance) Cr Sales the full amount.

It sounds complex but it's not that bad and I hope I explained it OK

Bill

PS this only applies to redeemable Face Value vouchers. The money off type of voucher, as we all assumed to start with is as we said, with a posting to Discount Allowed

Awesome yes that makes it clearer to me, I shall endeavour to sort this next time I'm there which may be tomorrow at this rate as I can't sit here without it being sorted.

I think I have a lot to learn wink

Just to clarify the first point,

When inputting the cash taken I take the Z reading and;

Dr cash a/c
Cr sales a/c

The Z reading assumes that any over-rings/errors are sales as these aren't sorted out at the time, instead the receipt has over-ring written on it and put in the till.

I then

Cr cash a/c
Dr cash till discrepancies (8206)

That all seems ok to you even though the sales a/c is showing more sales than it should? Am I right in thinking at the end of the finacial year the taxable profit will be reduced by the amount showing in 8206 discrepancies ?

Thanks for your time in this matter so far it's a great help smile

I don't know about you having a lot to learn, it's certainly testing me. This is like trying to unravel a knotted ball of string!!

The over statement of Sales when the vouchers were issued, should be corrected by the journal adjustment DR Sales Cr Vouchers.

I am assuming your first example is when a voucher is issued? What you could do, in future, after the previous corrections are done, is continue using the Z but Dr Cash and Cr Vouchers (instead of discrepancies)

In your second example, I am assuming thats when a voucher is redeemed? That's a bit more complicated to correct. I would DR Cash back in (the amount of cash hasn't actually been reduced - it was just received in advance) and CR Sales ( to bring the real Sales back to the correct figure) - Apologies - In my last post I didn't cover that. Then CR Discrepancies (that clears the expense misposting) and DR Vouchers (that reduces the creditor liability)

When it comes to dealing with the voucher redeemed in the future, you could enter sales as normal at the full value and use the vouchers in the till as the record of redeemed vouchers. So it would be DR Vouchers, Dr Cash/ Bank for the balance and CR Sales (full amount)

Think that's got it. Off to get some caffiene now

Bill

-- Edited by Wella on Wednesday 10th of March 2010 01:49:34 PM

Wella wrote:

This is like trying to unravel a knotted ball of string!!

Lol I couldn't of put it better myself if I tried wink

The whole thing has been like this, (never let it be said though that I don't appreciate the experience as this is more experience than I could of ever hoped for), I was basically handed three months worth of "paperwork" and asked to put it into sage, this was mainly purchase invoices some paid some not, expenses that I had to figure out whether or not they were business expenses or not and till receipts coupled with more receipts for what has been paid out of the till (ranging from business expenses such as bread for sandwiches to sell through to CDM which I eventually worked out was cadburys dairy milk that wasn't an essential business expense oh and lottery \o/). Oh and I still have to tackle wages but I think I've got that sussed along with bills for electricity etc and the list goes on.
So it's been a steep learning curve and I can't express enough how grateful I am to yourself and others who have helped me out on this forum. smile

As to your last post I think I can now sort the vouchers out, just been for a walk with my daughter in the woods and had a think and have finally got my head around the reasons for the liability a/c and why you would wait to show them as sales.

My final mither is concerned with over-rings and the faith that I am putting into sage or the accountant.

In a nutshell my concern is that at the moment over-rings show as sales and that the only contradiction is the discrepancies a/c 8206.
Will their accountant see the amount in 8206 and understand that the sales is showing too much value or should I just not worry as when the end of year comes round and all this gets fired off to the accountant that the debit for the discrepancies will offset the credit in the sales, or, should it be shown another way as at the moment it shows in neither the p&l or the balance cry

Just to recap and I hope the formatting works

		DR £	CR £	Previously Issued
Corrects voucher issue (No sale taken place)	Sales	100		This will correct Sales that included voucher payments
Increases Creditor liability when issued	Vouchers		100	Should = total value of vouchers previously issued

				Previously Redeemed
Corrects the balances	Cash	50		This will correct cash held and actual sales value
of cash held and sales	Sales		50	Should = Total value of vouchers previously redeemed

Reduces liability when redeemed	Vouchers	50		This will reduce the liabilty and remove an
Corrects misposting	Discrepancies		50	incorrect expense
				Should = Total value of vouchers previously redeemed

New Voucher Issued
Increases cash when voucher issued	Cash	20
Increases liabilty when voucher issued	Vouchers		20
New Voucher Redeemed
Reduces liability when voucher redeemed	Voucher	20
Increases Cash by balancing amount	Cash	30
Increases Sales (including voucher redeemed)	Sales		50

Hope that is a bit clearer (the numbers are just examples). The first parts are to correct the previous postings. the second is how to handle new postings
Just waiting now for some one to say "just do this......."

Bill

Nice one cheers for that it helps a lot, I shall implement this tomorrow before my brain explodes and I become a jibbering wreck evileye

So people actually buy vouchers for a butchers, like they would at Debenhams? Are these £ for £ or are they discounted in some way?

By the way, nice formatting Bill!

Hi Rob

Thanks

What are you trying to do to me, don't go there, vouchers issued at less than face value, more caffiene quick.

I am still waiting for some one to say there's an easier way. I just tried to reverse everything back to where it belonged, and to find a way to deal with them in the future. It started off simple enough and sort of snowballed.

Not sure I like the sound of the other drawings and expenses coming out of the till. I can see trouble ahead (CDM?)

Bill

After that Bill I would suggest Valium rather than coffee!

I'm a traditionalist...it's a large gin for me!

I've got to drive tonight, otherwise a nice 12 year old single malt would replace caffiene.

Did it make sense to you guys, I know theres always more than one way to do things with bookkeeping (you wont believe what I nearly wrote then), would you have done something different?

RobH wrote:

So people actually buy vouchers for a butchers, like they would at Debenhams? Are these £ for £ or are they discounted in some way?

By the way, nice formatting Bill!

Yup they are a hell of a good butcher (Q Guild top 100 butchers) and they also sell expensive very high quality food stuffs and wines etc etc so people buy vouchers as gifts for foody types smile

I can confirm however that as expensive as it is there still isn't much money in it wink

Wella wrote:

Not sure I like the sound of the other drawings and expenses coming out of the till. I can see trouble ahead (CDM?)

Bill

Not a lot I can really do, the cash isn't there so I put it as drawings and leave it to the accountant to sort, this is something I shall look at at a later date methinks smile

I've been keeping quiet on this because as soon as I looked at it I thought "Ooh, hows that going to work with Sales returns then" so figured, shut up or Bill's gonna visit me with a baseball bat with rusty nails in the end.

After the diagram though I can see how sales returns would be reversed in the same way as discrepancies so I'm feeling a bit safer.

I may have missed something but in principle from the diagrams (excellently self explanatory by the way) it seems to me to be a sound approach.

Just keep dreaming about that single malt for when you get home Bill.

Drive safely,

Shaun.

Had three pints of rather strong local brewed cask ale and didn't drive home

I think I covered all bases on this issue but it does make your head spin a bit, when trying to unravel a knotted ball of string. It's like trying to do it with boxing gloves on.

Was surprised how quiet you were on this one Shaun. No need to worry, I'm a pacifist (strange that a word that purports non violence has the word fist in it)

Bill

Fear not, I would have jumped in if I had fundamentally disagreed with anything but this thread was very much a work in progress so the last thing that you needed was my size tens all over it.

I think that we're getting a lot of questions at the moment that seem relatively straight forward and then they become monsters.

The thread with Rob last night about recognition as a sale was a good example but in that instance it's a case that tax law and the companies act are at odds with each other.

I came at it from the purist perspective. Rob and Sheila from the revenue's viewpoint. Another one of those cases where everyone was right dependent upon which bit of legislation you use.

I even went over to accounting web to see what their arguments were on it and accountants were basically debating it from the same perspectives as us... But using bigger words for the most part.

We eventually concluded (I think) that even though we're all correct we can only take one viewpoint and as it's HMRC that we have to deal with everyday then we'll go with the approach that they dictate.

Good point on pacifist... Friendly fire. There's another one.

I'm with you on the pacifist thing. brought my son up to appreciate that every living thing has equal rights and anything that you hurt in this life you have to be in the next one.

Bit me on the bum a bit as when he was very young he had a nightmare. I sat with him to try and get him back to sleep and he told me all about the dream which basically was caused by him and his little friends having pulled the legs off a daddy long legs. In his dream he had been that daddy long legs knocking on the door to come in but because he was so small I couldn't hear him.

Did I feel awful or what!

I Know exactly how your lad felt and I think most people do. I literally, wouldn'y hurt a fly.

I read the other threads and will move over to it and add my bit

We have the white knight and the dark night, I'm going to play devils advocate

See you on the other side

Same here. Definite Buddhist undertones to my outlook on life so should fit in fine when I eventually retire to mud hut territory in North East Thailand.

Fear not, your stuck with my opinions for at least the next 12 years yet!

And the plan for the time to retirement is to build a business based on the office from Ally Mcbeal. I reccon that I could make an excellent Richard Fish.

Bygones!

You mean unisex toilets and a fetish (hope Im allowed to use that word) for woggles?

Good luck anyway

I'm hearing Barry White in the background guys!

Nice to know we are such a compassionate bunch on here...I've been vegetarian for about 25 years on those same principles...I am the fattest veggie in Coventry!

Im far from being veggy Rob

Just couldn't hurt anything for the sake of it.

Bill

Fast becoming the fattest omnivore in Cornwall

You need to be a Buddhist veggie Rob. Fish and Chickens have been reclassified as vegetables!!! (really!)

although I would never kill anything I'm not a veggie myself as my argument is :

If people did not eat and / or wear them then farms would not raise animals so they would never have been born.

Who are we to deny an animal life even if at the end of it they become a consumable (literally).

I am however a strong believer in free range and would have no dealings at all with battery farms.

I just can't wear orange Shaun!

I have no axe to grind with omnivores so I won't get into a debate but last night after those gins I may have! Although interestingly, and not really to do with the animal husbandry argument, I saw a report in the Guardian after the failed recent climate change fiasco, that some Lord or other who attended said it may become as politically incorrect to eat meat as it is to drink and drive in a few years to come as breeding these animals for slaughter is the biggest threat to climate change..all to do with animal flatulence! I suppose I'll have to forego my vegetarian thali at the weekend too.

Shaun

I have personal link with farming (I think you mentioned you have also) and am under no illusion as to where my food comes from.

In my opinion farms, farming and farmers are an undervalued national asset, not only in the food they produce.

As you have said with out farms producing livestock, the countryside would look pretty empty but it goes way beyond that.

Going stop there before I really get on my soap box.

Bill

Yes let's stick at the three compassionate amigos!

One for all and all for one... Actually, I think Captain Jacks quote from Pirates of the Caribbean is more apt for us "Take everything, give nothing back!".

Bill. My families farm was predominantly dairy with some beef (they've sold up and retired now). All typical picture post card type open range type farming in sunny Lincolnshire.

Looks like I've come to the this thread a bit late. By a funny coincidence, farming and such is a big passion of mine too. I'd like to retire to Ireland, build an earthship and live off a smallholding. Not a veggie but I'm with Bill - there's no justification for mistreating animals or anything else for that matter.

Speaking as a scientist who has more than a passing knowledge of physics and physical chemistry, the whole anthropogenic climate change argument is less than convincing. That said, green-ness makes economic sense anyway. I just wish it weren't being foist on us under the current branding.

Cheers
Neil

Lincolnshire, fine farming real estate.

You hit the nail on the head with your remark "All typical picture post card type open range type farming in sunny Lincolnshire" Can you imagine the impact on tourism (domestic and imported) if we didn't have the country side we have. For a start I'm pretty sure Cornwall would be empty.

I think it was Napolean, who, when he saw the rolling British country side, said "...now I know why you fought so hard to defend it"

I wont start on the wildlife, climate and quality of life issues.

I like the Duchy of Cornwalls motto "One and All"

Nicely put Neil. I like the idea of an earthship. Am considering a more self sufficient lifestyle here myself

-- Edited by Wella on Thursday 11th of March 2010 02:18:26 PM

Just to go off topic a tad, cheers Wella, implemented your ways and workings and everything is working out fine.

Your help is greatly appreciated and thanks for all the time you spent helping me out,..................... sorry I drove you to drink biggrin

Nature of of the forum, the threads nearly always go off topic.

I have no problem with being driven to drink, it's getting home I have trouble with

No problem and glad to I helped

Bill