Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Loyalty Cards

lmiddlehamlmiddleham Feels At HomeRegistered Posts: 71
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

Comments

  • sdvsdv Experienced Mentor Registered Posts: 585
    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.
  • lmiddlehamlmiddleham Feels At Home Registered Posts: 71
    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!
Sign In or Register to comment.