The University's bookstore offers a Gift Card that may be purchased in amounts ranging from $5...
The University's bookstore offers a Gift Card that may be purchased in amounts ranging from $5 to $500. Suppose the bookstore sells a $100 gift card to a customer who pays for the gift card with cash.
How would this transaction affect the accounting equation of the bookstore?
Homework Answers
Solution: Let's study the given transaction which is a selling a gift card for $100 by bookstore:
Bookstore receives $100 : This will increase the 'Cash Account' balance of it by $100
Bookstore gives the gift card: This will reduce its 'Inventory' of cards by its cost (not given)
Bookstore would record cost : This will increase its COGS by its cost (not given)
Bookstore generated revenue through this transaction : Revenue will increase by $100.
Hence, this transaction would increase the Owner's equity.
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