What do unredeemed gift cards represent in a business context?

Unredeemed gift cards are considered breakage in a business context. This term refers to the revenue that a company recognizes from gift cards that have been sold but never redeemed by the customer. When a gift card is purchased, it is recorded as a liability on the balance sheet, as the business owes that value to the customer until it is redeemed. However, when customers forget about or choose not to use their gift cards, the business benefits as it retains the cash from the sale without having to deliver any goods or services in return. This unredeemed value effectively becomes income that the business can recognize, contributing positively to its financial performance.

The other concepts like net gain, debt, and profit loss do not accurately capture the phenomenon related to unredeemed gift cards. Net gain typically refers to the total profit after expenses, while debt implies an obligation that a company must repay. Profit loss indicates a decrease in profitability, which does not apply when a business recognizes income from unredeemed gift cards. Therefore, defining unredeemed gift cards as breakage clearly highlights how they positively impact a business's revenue.