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Journal Entries Question: Perpetual Inventory System & Credit Card Transaction
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Q: 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. Subscribe To This Site
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
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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
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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
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Dr Cost of Sales $7,500 Cr Inventories $7,500
Enter Your E-mail Address 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.
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.
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That's how I would record credit card sales and fees. Do well in your accounting studies!
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