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Posted by Paul Thomas, CPA on June 15, 2007, 11:21 am
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> Hi, I'm hoping to start my own business and I'm trying to teaching
> myself bookkeeping. I have a question regarding a sale paid by credit
> card that gets returned.
>
> Here is the transaction: Customer buys $100 worth of CDs with tax rate
> of 8% using a credit card (MC).Credit card fee is 6% and COGS is $75.
> I believe there is 6 distributions involved. Correct me if I'm wrong.
>
> (asset acct.) 1 Accounts Receivable - MC/Visa 102.00
> (expense acct.) 2 Credit Card Service Charge - MC/Visa 6.00
> (revenue acct.) 3
> Sales
> 100.00
> (liability acct.) 4 Sales Tax
> Payable 8.00
> (cost acct.) 5 Merchandise Purchases (COGS) - CDs 75.00
> (asset acct.) 6 Inventory -
> CDs 75.00
>
> In case the text gets all distorted when I post this, here is a
> written description of the DR/CR.
> 1) debit the asset acct. AR-Mastercard for total sale amt (including
> tax) less CC fee amt.- 102.00
> 2) debit the expense acct. CC fees - 6.00
> 3) credit revenue acct. Sales for sale amount less tax -100.00
> 4) credit liability acct. Sales Tax Payable - 8.00
> 5) debit Cost acct. Merchandise Purchases - CDs - 75.00
> 6) credit Inventory - CDs - 75.00
You can debit an A?R Mastercard account if you wish, but theyu get credited
to your bank pretty quickly these days (couple of days tops) so I would just
debit the bank and be done with it. Also in this area they post the full
charged amount and hit your account for the merchant fees on a monthly
basis. So ther wouldn't be the need to account for an adjusted receivable
if you were to book the sale as a receivable for the few days it's
outstanding. I also wouldn't book the merchant discount as a payable on a
per-sales transaction.
> I hope this is correct, text books never show all the accounts that
> get hit. They have very simple examples.
>
> Now, I'm not sure how to handle the return. Since we have to now give
> a charge back to the customer, we have to go through MC again so I'm
> assuming they will charge me again for the transaction, that is I just
> can't reverse the cc service charge #2 above. I guess each
> transaction is charged by the cc company regardless correct?
Oh you bet there's a fee for refunds, most likely the same rate. That is
one reason that smaller merchants require a "restocking" fee to cover some
of those costs and to deter returns.
--
Paul A. Thomas, CPA
Athens, Georgia
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