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Tracking purchase credits from a franchiser

Some franchisers refund a percentage of the royalty payment in the form of purchase credits (similar to scrip). The franchisee can use these corporate credits to purchase training, products, and other supplies from the corporate office.

You can track the amount of purchase credits you have garnered, and when you use them up, by creating an asset account in QuickBooks. (The credits, because they are the same as cash, can be considered an asset for your company.)

To track purchase credits from the franchiser

  1. Create an "other current asset" account called Corporate Credit. Leave the opening balance at 0.00.

  2. Create an income account called Corp Credit.

  3. Create an expense account called Co Credit.

  4. When the corporate office assigns purchase credits to you, enter the amount you have received as an "Increase" in the register of the new asset account (Corporate Credit). Assign the increase transaction to your Corp Credit income account.

    For example, if you have been issued $1500 in purchase credits, you enter "1500" in the Increase column of the "Corporate Credit" asset account. In the Account field of that transaction, you can enter your "Corp Credit" income account. Now the balance of your asset account is $1500, and the balance for your "Corp Credit" income account is also $1500.

  5. When you use some of the purchase credits to "purchase" items from corporate, enter the amount you have used as a "Decrease" in the register of the Corporate Credit asset account. Assign the decrease transaction to your Co Credit expense account.

For example, if you use $800 to "purchase" training from corporate, you enter "800" in the Decrease column of your Corporate Credit asset account. In the Account field of that transaction, you can enter your Co Credit expense account. Now the balance of your asset account is $700 (the amount of purchase credits you have left), and the balance for your Co Credit expense account is $800.

When you create a profit and loss report, the income and expense accounts show balances of $1500 and $800, respectively (using the previous example). When you create a balance sheet report, the Corporate Credit asset account shows a balance of $700.

KB ID# H_V_FRANCHISE_PURCH_CREDITS_TRACKING
9/30/2016 9:53:16 AM
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