Loyalty Cards

lmiddleham

Hi

I can't get my head round this at the moment, too early in the morning after a big night out!

A sole trader is offering loyalty cards where after 5 treatments, a client gets the 6th one free. The free treatment can be anything so the value of what they're getting can vary.

Do I have to provide anything in the accounts for this scheme?

Thanks

sdv

lmiddleham wrote: »

Do I have to provide anything in the accounts for this scheme?

From accounting point of view, there is nothing to be done.

Effectively what your client has done is sold 1 treatment for the price of 1.2 treatments
And 0.2 treatment will be delivered in future. therefore the sales values has already been collected with the previous 5 treatments

BUT this all done in disguise (a clever marketing ploy- like 3 for 2). You could theoratically argue that one may need to provide for accrued sales; but on the other hand hand one could easily argue that the selling price is for one treatment and not 1.2 sales, and the 6th treatment is advertising/promotional expense.

From the management point of view the client can keep the records of how many loyalty cards are issued and how many redeemed to see how sucessful this marketing strategy works.

lmiddleham

Thanks for your help.

I couldn't work out anything that would need to be provided but wasn't sure whether because nothing was needed or because I just couldn't figure out what was needed!