On the bookkeeping front, as long as the customers have not yet buy the wines with those cards I think that's still treated as a liability to the company.(aka the Accrual income).
FINN YU You are talking about giftcards though. The *entire* revenue received in giftcard sales would HAVE be considered a contingent liability because customers could reclaim *various percentages* of the card values by "buying" ANY possible item in the inventory, even on-sale items with little mark-up, making the total cost and thus net income unknown to the company until statement preparation. And yes, I am well aware that this is the normal procedure in accounting. However, just for the simple task of calculating the *break even point*, there is no need for Ma to count them as a contingent liability since the cards have *already been specified* with the exchangeable item and the amount (You already know that the *lowest possible profit* from a sale is $5000 NTD). But yes, if I were to properly record this according to the rules and prepare the actual statement for legal filing, I would make an entry of $5000 as sales, and $3000 as contingent liability, instead of making the entire $8000 as liability. On the other hand, if Ma was actually counting all of the $8000 as profit and using those numbers to calculate his break even point, what *Wu* warned him about would actually be completely relevant and true. Lastly, I don't think this has anything to do with *Accrued Income*. Accrued Income are payments *not yet received* physically by the company, but supposedly earned and accrued in the books periodically (per month, year, etc.), such as monthly interest on a bond that's only paid out twice a year. Giftcards are actually *unearned revenue*; cash received physically but not yet earned.
My apology, I meant to say it is an income in advance. I study accounting just for better understanding of my business law major. It could be much different when it is applied in practical situation. But thank you for your sharing, it is useful for me.
