Credit Sales and Receivables Page 403 to 405

Methods of payment Cash Debit cards Credit cards

Journal Entries to record debit/credit cards purchases – a credit card expense DR Cash $X-Y DR Credit Card Expense $ Y CR Sales $X Note: The credit card expense is the fee that is charged by credit card companies for use of their Card reading machines/services.

Journal entry to record credit card sales DR Accounts Receivable, Credit Card Co. $X CR Sales $X This journal entry is made after the receipts to the credit card company have been sent and while the business waits for payment

When payment is received from the credit card company… DR Cash$X-Y DR Credit Card Expense$Y CR Accounts Receivable – Credit Card Co. $X This journal entry records the receipt of cash less the credit card expense

Adjusting Entries If a sale and cash receipt occur in different periods, you must report the credit card expense in the period of the sale by using an adjusting entry… Example on next slide…

Example Credit card company has not paid $600 (an account receivable on the business side)… Credit card expensen = 4% of the sale… Entry # 1: Dec. 31: DR Credit card expense $24 CR Accounts Rec. – credit card co. $24

Example cont’d Entry # 2 DR Cash $576 CR Accounts Rec. – credit card co. $576

Questions Progress Check 8-4 to 8-5 QS 8-1 to 8-3 Exercise 8-1 to 8-4