Recording loyalty reward points or non-cash rewards in QuickBooks

A simple Journal Entry records loyalty points or rewards* earned which can be redeemed only at a specific location. Entering a bill as usual, you can then use these points or rewards to pay an expense.

Problem: Your business receives loyalty points or rewards from XYZ Car Dealership. For every 100 points you earn, you get a $10 reward. The reward can be used only at XYZ Dealership. You have earned $170 in rewards. You had work done on the vehicle that totaled $102.23. You want to record the loyalty rewards in QuickBooks and apply a portion of them to the cost of the repairs. You want to leave the remainder in QuickBooks so you can keep track of the rewards earned and used. You want the total amount of the vehicle repairs to show up on expense reports.

Accounts Involvedba-xyzrewards

  1. Other Income: In Chart of Accounts, create an Other Income account called XYZ Rewards OI
  2. Bank Account: In Chart of Accounts, create a new Bank Account called XYZ Rewards BA (QuickBooks requires you to use a different name then the one used for the Other Income account)
  3. Accounts Payable: already set up

Go to Company / Make Journal Entry to enter a journal entry to record the value of the reward money received.

  1. Line 1 Account: Select Bank Account XYZ Rewards BA | Debit: Enter $170 | Name: Select Vendor Name: XYZ Car Dealership. This will deposit the value of the rewards into the bank account called XYZ Rewards BA
  2. Line 2 Account: Select Other Income Account XYZ Rewards OI | Credit: Enter $170 | Name: Select Vendor Name: XYZ Car Dealership (same as Line 1). This will record the value of the rewards as Other Income in the XYZ Rewards OI account
  3. Save the Journal Entry

je-xyzrewards

Go to Vendor / Enter Bill to enter the invoice for the work done on the vehicle and record it in the Accounts Payable account as a bill ready to be paid

  1. Vendor: XYZ Car Dealership (same as the Journal Entry from above)
  2. Account: The account you use to track vehicle repairs and maintenance.
  3. Amount: $102.23
  4. Memo: Enter as needed or wanted
  5. Save the Bill

Go to Vendor / Pay Bill to pay the bill for repairs with the reward money value received. This will remove the bill from Accounts Payable and mark it as paid and reduce the bank account called XYZ Rewards BA by $102.23.

  1. Select the Bill you entered from above
  2. Select the Bank Account you created: XYZ Rewards BA
  3. Select the date for the payment
  4. Pay Selected Bill

pl-xyzrewards

To see the results of your entries, go to Reports / Company & Financial / Profit & Loss Standard

  1. Be sure the date From and To includes the date of the above transactions
  2. Check the Expenses for the vehicle expense that you entered above – $102.23
  3. Check Other Income for the Reward Amount you entered above – $170

Go to Reports / Company & Financial / Balance Sheet Standard

  1. Check Current Assets for balance of XYZ Rewards BA – $67.77 ($170 – $102.23)

Copyright Julie M. Watkins 2016

*Disclaimer: Information is provided as a courtesy to QuickBooks users. If you have questions as to the whether or not these rewards are taxable or deductible, please consult your accountant or tax advisor.

 

About Me: With a degree in Elementary Education, I worked in adult education, family literacy, and elementary education for more than ten years. In 1999, I left the education field to run my own businesses. Currently, I am a small business owner, bookkeeper, and expert QuickBooks user. My experience includes bookkeeping for restaurant, website design service, bookkeeping, house cleaning, and marketing businesses. I also use QuickBooks to track my personal finances.

Keywords: QuickBooks, reward points, loyalty rewards, non-cash income, recording rewards earned, recording reward points, recording rewards redeemed,  journal entry, other income, accounts payable, bank account, chart of accounts.

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