1Why would a company allow the use of third party credit cards?
1. The seller does not have to decide who gets credit and how much
2. The seller avoids the rick of the customer not paying
3. The seller gets cash from the bank faster than had it granted credit directly to the consumer
4. More credit options for the customers means more sales.
2What is the journal entry to record credit card sales?
This is an entry for a 5,000 credit card sale with a 3% processing fee
Cash 4850
Credit Card Expense 150
Sales Revenue 5,000
3How do you calculate credit card fees and cash received?
Credit card fees = sale amount x Fee %
Cash received = sale amount - credit card fee
4What is the journal entry to record COGS?
This is an entry to record COGS when inventory costing 2,000 is sold
COGS 2,000
Merchandise Inventory 2,000
5What is accounts receivable?
Accounts receivable is a current asset represetning money customers owe a business from credit sales. It's normal balance is a debit.
6What is the journal entry for a sale on account/credit?
Accounts Receivable Debit
Sales Revenue Credit
7What is the journal entry when a customer pays their account from a sale on account/credit?
Cash Debit
Accounts receivable Credit
8What are the two methods for uncollectible accounts?
1. Direct Write-Off Method
2. Allowance Method
9What is the direct write off method?
Bad Debts Expense is recorded when a specific customer's account is determined to be uncollectible
10What is the journal entry to write off an uncollectible account using direct write-off?
Bad Debts Expense Debit
Accounts Receivable Credit
11What is the first journal entry when a previously written-off customer returns to pay?
The accounts needs to be reinstated
Accounts Receivable Debit
Bad Debts Expense Credit
12What is the second journal entry when a previously written-off customer pays?
Record the payment
Cash Debit
Accounts Receivable Credit
13What is the main difference between the direct write-off and allowance methods?
Direct Write-Off: Records actual bad debts when identified.
Allowance: Estimates bad debts in advance.