Your arcade prints tickets, guests trade them for prizes, and a wall of plush toys, gadgets, and candy slowly empties out. Simple to run. Surprisingly easy to account for wrong. And almost nobody writes about how to do it right, so most FEC owners are guessing.<\/p>\n\n\n\n
Done well, your redemption accounting tells you exactly what your arcade really costs to run and whether it is making money. Done poorly, it quietly distorts both your profit and your tax bill. Here is how the pieces actually work.<\/p>\n\n\n\n
The most common mistake: an owner buys a $2,000 case of prizes and books the whole thing as an expense the day it arrives. It feels right. The money left the bank.<\/p>\n\n\n\n
But for accounting purposes, those prizes are inventory, an asset sitting on your books, until a guest actually redeems them. You have not incurred the cost of a plush toy by buying it. You incur it the moment it leaves the counter. Expensing the full purchase up front overstates your costs this month and understates them next month, so your profit lurches around for reasons that have nothing to do with how the business actually performed.<\/p>\n\n\n\n
The right flow: prize purchases go to an inventory asset account. As prizes are redeemed, that cost moves into redemption COGS (the wholesale cost of arcade prizes guests redeem, meaning what it costs you to deliver what you sell). Cost follows the prize, not the purchase order.<\/p>\n\n\n\n
Here is the relief. You can account for this properly without scanning a barcode on every keychain. Most FECs handle redemption inventory with a periodic approach:<\/p>\n\n\n\n
It is the same method a small retail shop uses for low-cost, high-volume goods. No item-level tracking required. Just a consistent count and a little subtraction.<\/p>\n\n\n\n
Say you start the month with $1,500 in prize inventory.<\/p>\n\n\n\n
Redemption COGS for the month is $1,500 + $800 \u2212 $1,400 = $900.<\/strong> That $900 is your real prize cost, and your inventory asset on the books now reads $1,400, which matches what is actually on the wall. Clean, accurate, and it took one count.<\/p>\n\n\n\n Your count will rarely match perfectly. Prizes get damaged, miscounted, pocketed, or given away as goodwill. That gap is shrinkage, and a little of it is normal in any redemption operation. The point of counting is not perfection. It is catching the difference between a little (expected) and a lot (a problem worth investigating). A redemption cost that suddenly jumps as a percentage of arcade revenue is usually shrinkage or mispriced redemption, and you only spot it if you are tracking it.<\/p>\n\n\n\n Owners sometimes try to value redemption by tickets outstanding or ticket liability. For most small to mid-size FECs, that adds complexity without changing decisions. The cleaner, more useful number is the actual cost of prizes that left the building, measured by the count method above. Track the cost of what you handed out, compare it to what the arcade earned, and you have the margin that actually matters.<\/p>\n\n\n\n Redemption accounting is one piece of knowing your arcade’s true profitability. The arcade often looks like a winner because it is busy and the register is loud. But between redemption COGS and game licensing fees (recurring costs per arcade title), it can quietly run a thinner margin than the quiet attraction in the corner. You only see that when prizes are accounted for as inventory and matched against arcade revenue, month after month, not as a lump purchase whenever a case arrives.<\/p>\n\n\n\n If your prize purchases are getting expensed the day they arrive and you have never run a redemption count, your arcade’s real profit is a mystery and your monthly numbers are bouncing for no real reason. That is exactly the kind of clarity we build for FEC owners every month. We set up the inventory accounts, build the count into your monthly close, and keep your redemption COGS accurate so you finally know what the arcade nets. Schedule a free financial diagnostic<\/a> and we will show you what’s possible.<\/p>\n\n\n\n Because when you Know Your Numbers, you have the freedom to create better experiences for your guests, and more freedom in your life as an owner. \ud83c\udfaf<\/p>\n","protected":false},"excerpt":{"rendered":" Your arcade prints tickets, guests trade them for prizes, and a wall of plush toys, gadgets, and candy slowly empties out. Simple to run. Surprisingly easy to account\u2026<\/p>\n","protected":false},"author":1,"featured_media":66,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-123","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/posts\/123","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/comments?post=123"}],"version-history":[{"count":1,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/posts\/123\/revisions"}],"predecessor-version":[{"id":124,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/posts\/123\/revisions\/124"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/media\/66"}],"wp:attachment":[{"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/media?parent=123"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/categories?post=123"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/orchardsbookkeeping.com\/blog\/wp-json\/wp\/v2\/tags?post=123"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Watch for shrinkage, and know it is normal<\/h2>\n\n\n\n
Why the tickets themselves are not the number<\/h2>\n\n\n\n
The bigger picture<\/h2>\n\n\n\n
Where we come in<\/h2>\n\n\n\n