Accounting for Retail Coupons

 Discount Coupons Issued by RetailerMoney Coupons Issued by RetailerDiscount Coupons Issued by Manufacturer
Effect on Sale Price:As the seller issued the coupon, the coupon has the effect of reducing the sale price of the good or service. Money coupons are used as cash at the seller's retail outlets. (Example: Canadian Tire money) Although they can be used to pay for an item, they do not in effect lower the sale price of the item itself.  As the seller did not issue the coupon, the coupon does not actually reduce the sale price of the good or service. Rather, the retailer sells the item at the original price, and the manufacturer agrees to reimburse the retailer for the amount of the coupon.  
Effect on Tax:As the sale price is reduced, the tax will be collected on the after-coupon sale price.  As the price of the item has not been lowered by the money coupons, tax must still be collected on the entire sale amount. As the price of the item has not been lowered by the manufacturer's coupons, tax must still be collected on the entire sale amount.
Effect on Accounting:No special accounts need be created to facilitate this form of coupon. Owing to the fact that the business does not collect cash equal to the sale amount, a "Coupon Expense" account must be created to record the loss of cash resulting from the sale. Owing to the fact that the business does not collect cash equal to the sale amount, an "Account Receivable" account must be created to record the cash owed to the retailer by the manufacturer.
Double Entry: (Assume original price is $100.00, and the coupon is for  $10.00.)
Cash96.30
  Sales90.00
  GST Payable6.30
Cash97.00
Coupon Expense10.00
  Sales100.00
  GST Payable7.00
Cash97.00
A/R - Manufacturer10.00
  Sales100.00
  GST Payable7.00


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