JournaldrillCredit card sales
A credit card sale is recorded like a cash sale with a fee: debit Cash for the amount the processor deposits, debit Credit Card Expense for the fee, and credit Sales Revenue for the full selling price. If the processor settles later, debit Accounts Receivable from the card company instead of Cash.
Syntax
Dr Cash (net), Dr Credit Card Expense (fee) / Cr Sales Revenue (gross)| Part | What it is |
|---|---|
Cash | Debited for the amount actually deposited by the card processor. |
Credit Card Expense | Selling expense for the processor's fee, typically 2% to 4% of the sale. |
Sales Revenue | Credited for the full price charged to the customer. |
Accounts Receivable, card company | Used when the processor settles days later (common for store cards or non-bank cards). |
Examples
Dr Cash 1,940, Dr Credit Card Expense 60 / Cr Sales Revenue 2,000Result: Revenue 2,000, expense 60, cash up 1,940
2,000 card sale with a 3% processing fee deposited the same day.
Dr Cash 1,940, Dr Credit Card Expense 60 / Cr Sales Revenue 2,000; Dr Cost of Goods Sold 1,200 / Cr Inventory 1,200Result: Gross profit 800 before the fee
Same sale for merchandise under a perpetual system.
Dr Accounts Receivable, Card Co. 1,940, Dr Credit Card Expense 60 / Cr Sales Revenue 2,000; later Dr Cash 1,940 / Cr Accounts Receivable, Card Co. 1,940Result: Same revenue and expense; cash arrives when the processor settles
Used when settlement is not immediate.
Common mistakes
- Recording revenue net of the fee: sales must show the full price; the fee is a separate expense.
- Forgetting the fee until the monthly statement arrives: record it with each batch so the cash account matches the bank.
- Treating card sales as receivables from the customer: the customer has paid; any receivable is from the card processor, and only briefly.
Practice Credit card sales
These drills check your answer on live data, free, no account needed.
- Credit card salesSaltmarsh Outfitters makes $12,500 of sales paid by customers with bank credit cards. The card processor charges a 2.4% fee and deposits the net amount in Saltmarsh's bank account the same day. Ignore cost of goods sold.
Questions
Are credit card sales recorded as cash sales?
Usually yes, because bank card processors deposit funds within a day or two. The processing fee is recorded as an expense at the same time.
What type of account is credit card expense?
An operating (selling) expense, sometimes called merchant fees or bank service charges.
Related
- Cash saleHow to record a cash sale: debit Cash, credit Sales or Service Revenue. For merchandise under a perpetual system add Dr Cost of Goods Sold, Cr Inventory.
- Collecting a receivableHow to record a customer paying an invoice: debit Cash, credit Accounts Receivable. Partial payments, early-payment discounts and why there is no revenue.
- Petty cashHow to account for a petty cash fund: establish it (Dr Petty Cash, Cr Cash), record expenses only when replenishing, and handle a shortage or overage.
- Sale on accountHow to record a sale on credit: debit Accounts Receivable, credit Sales or Service Revenue, plus the cost of goods sold entry and the later collection.