Journal Entry for Credit Card Sales Transaction

Q: Prepare the journal entries for the following credit card sales transactions (the company uses the perpetual inventory system):


Sold $3,000 of merchandise with a cost of $1,500, on an assortment of credit cards. Net cash receipts are received 7 days later, and a 4% fee is charged.

debit card

A:
I would do the following journal entries for these transactions:

Dr Debtors.................$3,000
Cr Sales......................$3,000

Dr Cost of Good Sold.......$1,500
Cr Inventory......................$1,500
Credit sale of inventory worth $3,000


Because it is a
perpetual system, where we keep perpetual (continuous) records of inventory, we always adjust the inventory account (we don't have a purchases account).

7 days later I would do the following entries:

Dr Fee.................$120
Cr Debtors................$120
Fee of 4% of $3,000.

Dr Bank................$2,880
Cr Debtors..................$2,880
Received $2,880 from credit card company ($3,000 - $120)


As you can see the debtors' balance is reduced by the 4% fee ($3,000 X 0.04 = $120). The remaining balance is $2,880 ($3,000 - $120).


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