ACC151Chapt7 - Chapter 7: Accounting for Receivables...

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Chapter 7: Accounting for Receivables ACCOUNTS RECEIVABLE Amounts due from customers for credit sales Credit sales require: maintaining a separate account receivable for each customer & accounting for bad debts that result from credit sales SALES ON CREDIT On July 16, Barton Co. sells $950 of merchandise on credit to Webster Co, and $1,000 of merchandise on account to Matrix, Inc. A/R Webster debit 950 A/R Matrix debit 1,000 Total of Accounts Receivable = Total of Both On July 31, Barton Co. collects $500 from Webster, Co., and $800 from Matrix,Inc. on account. Date Description Debit Credit 7/21 Cash A/R Webster A/R Matrix Paid by Customers 1,300 500 800 CREDIT CARD SALES Advantages of using a credit card: Customers’ credit is evaluated by the credit card issuer Sales increase by providing purchase options to the customer The risks of extending credit are transferred to the credit card issuer Cash collections are quicker How it works: 1) With bank credit cards, the seller deposits the credit card sales receipt in the bank just like it deposits a customer’s check 2) The bank increases the balance in the company’s checking account 3) The company usually pays a fee of 1% to 5% for the service (depends how big the store is) On July 16, 2011 Barton Co. has a bank credit card sale of $500 to a customer. The bank charges a processing fee of 2%. The cash is received immediately Date Description Debit Credit
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ACC151Chapt7 - Chapter 7: Accounting for Receivables...

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