Journal Entries Question:
Perpetual Inventory System & Credit Card Transaction

Credit cardQ: Prepare journal entries for the following credit card sales transactions using the perpetual inventory system:


Sold $10,000 of merchandise, that costs $7,500, on MasterCard credit cards. The net cash receipts from sales are immediately deposited in the seller's bank account. MasterCard charges a 5% fee.

A:
In this transaction you actually have 2 components. The 1st part is the sales of goods. The 2nd part is the fee charged by Mastercard. We record each of these separately.

Here are the journal entries for each of these transactions:

Dr Bank $10,000
Cr Sales $10,000

AND

Dr Cost of Sales $7,500
Cr Inventories $7,500


The above 2 entries are only for the sales themselves. Note how we adjust inventories (not "purchases") in the 2nd entry above as it is a perpertual inventory system. For more information on this entry see the
lesson on perpetual and periodic inventory systems.

The credit card fees come to 5%, so we take the sales (which were processed through a credit card machine or program) and multiply this by 5% to get the amount. The entries are as follows:

Dr Fees (expense: $10,000 x 5%) 500
Cr Bank 500


Instead of the entries above we could also pass a composite (combined) entry, as follows:

Dr Bank $9,500
Dr Fees (expense: $10,000 x 5%) 500
Cr Sales $10,000

AND

Dr Cost of Sales $7,500
Cr Inventories $7,500


All we are doing here is just doing one entry for bank ($9,500) instead of two entries (debit $10,000 and credit $500). Both ways of journalizing this transaction (as above) are totally valid.

As a final note bear in mind that the $10,000 of Mastercard sales above would probably have been made up of multiple sales on multiple days. In such a case each sale and the fee for each sale could be its own entry. However, one could also take the sales over a period of time, such as a month, and just pass one large batch entry at the end of the month for all sales and for all fees.

That's how I would record credit card sales and fees. Do well in your accounting studies!

Best,

Comments for Journal Entries Question:
Perpetual Inventory System & Credit Card Transaction

Click here to add your own comments

perp inv & cred trans
by: Mr Trap

thnx for your time and explanation of the answers.

Click here to add your own comments

Return to Ask a Question About This Lesson!.






Enjoying this Website?
Help Support it with a Donation

OR...





Advertise on ventoup.ru

Share
Additional Info



All the lessons on this site and much, much more...

Available Now On


Get Your Degree!

Find schools and get information on the program that’s right for you.

Powered by


Subscribe to
The Student Accountant newsletter

Enter Your E-mail Address
Enter Your First Name (optional)
Then

Don't worry — your e-mail address is totally secure.
I promise to use it only to send you The Student Accountant.




Related pages


preparing financial statements from trial balancegeneral ledger definition examplesample of general ledger sheetwip inventory definitioncredited or debitedwhat is the difference between notes payable and accounts payableperpetual vs periodic inventorytagalog basicsexpense accrual journal entrycalculating percentage markupavco advantages and disadvantageswhat is the formula for working out percentagesaccounting and bookkeeping pdfbalance sheet debtorsjournal entry for prepaid rentposting from journal to ledgerlifo costaccounts payable conceptsmeaning of liability in hindiperforma of income statementbookkeeping testsexamples of indirect laborweighted average cost of inventory formulajournal entry for accrued interestincome statement adalahmeaning debtorsjournal entry for receiving payment on accountexamples of trial balancesaccounting basics quizdouble entry for accounts receivabledouble entry records for depreciationspecial journals in accountingsundry creditors definitionreceived cash for services performed journal entryequity hindi meaningdifference between accrued expenses and outstanding expensestwo column journal accountingjournal entry bad debt expenseallowance method journal entrythe statement of stockholders equitywhat does accrued salaries meanfifo vs lifo accountingtally exerciseunearned revenue is a liabilityvat formulasan accounts receivable ledger isdebit credit journalbeginners guide to accountingjournal entries for fixed assets accountinghow to calculate ending inventorymeaning of equity shares and preference sharesinventory to sales ratio formulaaged payablescost of goods sold journal entry perpetualtransaction cycles in accountingwhere to buy college textbooks cheapdifference between depreciation expense and accumulated depreciationaccounting basics for beginnersjournalizing entriesbookkeeping meaning & definitionwhat is an adjusting entrybalancing ledger accountsknet textbooksfreight outwardledger and trial balancedebit balance and credit balance differenceequation for cost of goods soldaccounting words dictionarydebtors account definitionlifo cogsjournal posting accountingfinancial accounting final exam sampleaptitude test on financesole proprietorship financial statements