To illustrate anita ferreri purchases 1000 of compact

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To illustrate, Anita Ferreri purchases $1,000 of compact discs for her restau- rant from Karen Kerr Music Co., using her Visa First Bank Card. First Bank charges a service fee of 3%. The entry to record this transaction by Karen Kerr Music is as follows. Cash 970 Service Charge Expense 30 Sales 1,000 (To record Visa credit card sales) Accounts Receivable 407 Cash Flows H11001 588,000 A OE L H11005 H11001 H11001 588,000 H11002 12,000 Exp H11002 600,000 Cash Flows H11001 970 A OE L H11005 H11001 H11001 970 H11002 30 Exp H11001 1,000 Rev PDF Watermark Remover DEMO : Purchase from to remove the watermark
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408 Chapter 9 Accounting for Receivables Issuer maintains customer accounts Issuer does credit investigation of customer Credit card issuer Customer Retailer Issuer undertakes collection process and absorbs any losses Retailer receives cash more quickly from credit card issuer Credit Illustration 9-9 Advantages of credit cards to the retailer How Does a Credit Card Work? Most of you know how to use a credit card, but do you know what happens in the transaction and how the transaction is processed? Suppose that you use a Visa card to purchase some new ties at Nordstrom . The salesperson swipes your card, and the swiping machine reads the information on the magnetic strip on the back of the card. The salesperson then types in the amount of the purchase. The machine contacts the Visa com- puter, which routes the call back to the bank that issued your Visa card. The issuing bank ver- ifies that the account exists, that the card is not stolen, and that you have not exceeded your credit limit. At this point, the slip is printed, which you sign. Visa acts as the clearing agent for the transaction. It transfers funds from the issuing bank to Nordstrom’s bank account. Generally this transfer of funds, from sale to the receipt of funds in the merchant’s account, takes two to three days. In the meantime, Visa puts a pending charge on your account for the amount of the tie purchase; that amount counts immediately against your available credit limit. At the end of the billing period, Visa sends you an invoice (your credit card bill) which shows the various charges you made, and the amounts that Visa expended on your behalf, for the month. You then must “pay the piper” for your stylish new ties. Assume that Nordstrom prepares a bank reconciliation at the end of each month. If some credit card sales have not been processed by the bank, how should Nordstrom treat these transactions on its bank reconciliation? ACCOUNTING ACROSS THE ORGANIZATION PDF Watermark Remover DEMO : Purchase from to remove the watermark
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Notes Receivable 409 DO IT! DISPOSITION OF ACCOUNTS RECEIVABLE action plan a20 To speed up the collection of cash, sell receivables to a factor. a20 Calculate service charge expense as a percentage of the factored receivables.
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