Why would you ever discount a gift card? I asked myself that same question! But, I have since found that customers want to give away value for promotion or other reason. So you can discount a gift card but the issued amount doesn't change if you are using Square.

In Square (and probably other systems) When you discount a gift card the face value of the gift card stays the same. But the amount you paid for it is less. So we handle that by putting the discounted amount into the discounts and keeping the face value of the liability the same.

For example: you sell a gift card for $50.00 but discount the transaction $25.00 and pay for it in cash.

The result would be this accounting treatment where your liability is still 50.00 but you only collected 25.00 so 25.00 is added to discounts.

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