Credit Card Sales Accounting

Credit card sales accounting will vary depending on whether or not the cash register is linked directly to the credit card company and cash is received immediately, or payment is received from the credit card company at a later date.

As an example, suppose a business has credit card sales of 1,000, and the processing fee payable to the credit card company is 2% (20).

Credit Card Sales Received Immediately

If the cash register is linked directly to the credit card company and the cash is received immediately, the credit card sales are accounted for by the following journal entry:

Credit Card Sale – immediate receipt of cash
Account Debit Credit
Cash 980
Credit card expense 20
Sales 1,000
Total 1,000 1,000

The credit card sales journal entry effectively treats the sale as cash sale, but reduces the cash received by the expense for using the card deducted by the credit card company.

The Accounting Equation

The accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus equity of the business. This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.

For this transaction the accounting equation is shown in the following table.

Credit Card Sales
Assets = Liabilities + Owners Equity
Cash = None + Retained Earnings
980 = 0 + 1,000 – 20

In this case the asset of cash has increased by 980 and the income statement has been credited with sales of 1,000 and credit card fees of 20. The 980 credit to the income statement increases the net income which increases the retained earnings and therefore the owners equity in the business.

Credit Card Sales Received at a Later Date

If the cash register is not linked directly to the credit card company and the cash is received at a later date, then the credit card sales would be accounted for by a two stage process using the following journals:

The first journal establishes the amount due from the credit card company as an accounts receivable.

Credit Card Sales – amount due from the credit card company
Account Debit Credit
Accounts receivable 1,000
Sales 1,000
Total 1,000 1,000

When the cash is received from the credit card company, the second credit card sales journal is completed to record the receipt as follows:

Credit Card Sales – cash received
Account Debit Credit
Cash 980
Credit card expense 20
Accounts receivable 1,000
Total 1,000 1,000

The cash less the fee is received from the credit card company, the accounts receivable balance is cleared, and the credit card fee for processing is charged to the credit card expense account.

Popular mdct.ru Examples

Another mdct.ru example for you to discover.

Credit Card Sales Accounting July 4th, 2017Team

You May Also Like


Related pages


what is the accounts receivable turnover ratiobad debt expense calculationprofit markup calculatorstatement of comprehensive income formatinvoice payment terms wordingannuity due tableunfavorable labor rate variancebookkeeping process flowinterest on investment journal entrywhat are the efficiency ratioshow to compute debt to equity ratiojournal entries for outstanding expensestransactional analysis examplesjournal entry for applied overheadhow to maintain accounts for small business in excelhow to calculate markup from cost and selling priceactivity based costing formulastockholders equity statement examplefactory overhead appliedcalculating accounts receivable daysaccounting quiz questions and answersprove it excel practice testgeneral ledger journal entryaccounting ajereorder point and safety stockexcel formula irrbookkeeping excel spreadsheetsales ledger control account formatformula for receivable turnoverjournal entry for convertible bondsjournal entries for fixed assets and depreciationpv of $1 tablepv in excelperpetual inventory system exampletransactional accounting definitioncalculate gross margin formulafinancial accounting exercises and solutionsfixed manufacturing overheadhow to calculate accounts receivable turnover ratiorumus discount factoramortization schedules in exceldefine accumulated depreciationbank reconciliation spreadsheetallowance for doubtful accounts ispresent value of an annuity equationcash count spreadsheetweighted average with percentagesdays sales outstanding analysisaccounts payable a credit or debitcompute inventory turnoverirr internal rate of return formulaadjusting entrieannuity formuladepreciation cost per unitpremium bonds payablespreadsheet accounts templatejournal in accountingaccrued expenses liabilitydefine capital injectionpayroll tax expense journal entryintercompany receivables and payablescontribution margin income statement formatintangible fixed assets amortisation policyrevenue projections templatedeclining balance ratefinished goods inventory calculationpurchase return and allowances normal balanceannuity with growth formulamargin vs markup calculatorweighted average contribution margindefine debtorledger examplesadjusting entry for depreciation on equipmentunits of production method of depreciationfob destination meaning