Natalie has had much success with her smoothies business over the past number of months. Some customers have shown an interest in purchasing gift certificates from Natalie. Natalie is considering  a gift certificate that would include a recipe book and all of the supplies needed to create two cups of smoothies. Natalie wants to make sure that she has considered all of the risks and rewards of issuing gift certificates. She has come to you with the follow:

1. From what I understand, if I sell a gift certificate, I need to be recording the money received as “unearned revenue.” I am a little confused. How is the use of this account the same as the money that I received from customers that have paid me a deposit for premade smoothies? 

2. What if I record the sale of gift certificates as revenue instead of unearned revenue? Technically, I have made a sale of a gift certificate and therefore should be recording amounts received as revenue for the sale of a gift certificate. What if a gift certificate is never used? Does this not justify a sale being recorded? 

Instructions 

Answer Natalie’s questions.