AC 210 Lecture Notes - Lecture 32: Matching Principle, Accounts Receivable
5 Jun 2018
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Credit Card Sales
Retail companies, which sell merchandise in small quantities directly to consumers,
often receive a significant portion of their revenue through credit card sales. Some credit
card receipts, specifically those involving credit cards issued by banks, are deposited
along with cash and checks made payable to the company. The company receives cash
for these credit card sales immediately. Because banks that issue credit cards to
customers handle billing, collections, and related expenses, they usually charge
companies between 2% and 5% of the sales price. This fee is deducted when the
receipts are deposited in the company's bank account, so these credit card receipts are
slightly more complicated to record than other types of cash deposits. If a company
deposits credit card receipts totaling $1,000 and the fee is 3%, the company makes a
compound entry that debits cash for $970, debits credit card expense for $30 (3% of
$1,000), and credits sales for $1,000.
Some credit card receipts must be treated as receivables rather than cash. For
example, many gas stations and department stores provide customers with credit cards
that can be used to buy goods or services only at the issuer's place of business. When
a customer makes a purchase, the company must debit the customer's account and
credit the sales account. There are also some major credit cards that are not issued by
banks, and receipts from these cards must be sent to the credit card company for
reimbursement rather than deposited at a bank. After submitting credit card receipts
totaling $1,000 directly to a credit card company, the company that makes the sale
records the entry by debiting accounts receivable and crediting sales.
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Document Summary
Retail companies, which sell merchandise in small quantities directly to consumers, often receive a significant portion of their revenue through credit card sales. Some credit card receipts, specifically those involving credit cards issued by banks, are deposited along with cash and checks made payable to the company. The company receives cash for these credit card sales immediately. Because banks that issue credit cards to customers handle billing, collections, and related expenses, they usually charge companies between 2% and 5% of the sales price. This fee is deducted when the receipts are deposited in the company"s bank account, so these credit card receipts are slightly more complicated to record than other types of cash deposits. If a company deposits credit card receipts totaling ,000 and the fee is 3%, the company makes a compound entry that debits cash for , debits credit card expense for (3% of. Some credit card receipts must be treated as receivables rather than cash.
