credit card entry?

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This query is : Resolved

KRATI (Querist)

25 February 2008 a firm[say a] has taken a frenchise of a product from a firm[say b],
firm-a accepts only credit card payments,
the amount of sale(credit card sale) is send to firm-b.
later firm-b will pay some amount to firm-a as per their contract.
how will the credit card payments be recorded in books of firm-a.
Also some bank charges are deducted for this facility by the bank.
please give me entries to be passed in this case.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

25 February 2008 The transactions have not been described with full clarity.Why the credit card sale proceeds are sent to b?

KRATI

KRATI (Querist)

26 February 2008 firm-a purchases goods from firm-b but no payment is done, when their goods are sold sales amount is send to firm-b,
then firm-b sends back some %of the profit to firm-a. this is as per their contract.the clint(firm-a) told us that credit card sales amount is send to firm-b.

KRATI

KRATI (Querist)

26 February 2008 this is first year of business therefore few information is available.

Srinivas Sharma KN

Srinivas Sharma KN (Expert)

26 February 2008 Please clarify how you are accounting purchases and sales. Pattern of billing both purchase and sales. While sending goods, how your firm-b is billind? Is is in firm-a name? While selling whether firm-a is using its name? If the answer is yes, then firm-b is creditor of firm-a and entries are to be passed accordingly. If the answer is no, then firm-a is acting is on behalf of firm-b, all the stocks belongs to firm-b and firm-a is receiving commission for the same. I think later is position of firm-a. Create a ledger account in the name of firm-b, enter all the transactions whether purchase or sales. Regarding amount received, treat the same as commission received.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)

26 February 2008 In the books of A

From what I have understood:

1. Purchase from B
Purchases a/c Dr
To B
2. Sales by credit Card
Bank a/c (EDC-swiping machine provider)Dr
To sales
3. Payment to B
B a/c Dr
To Bank a/c
4. Commission payment by B to A
Bank a/c Dr
To Commission earned

KRATI

KRATI (Querist)

26 February 2008 thank u sir for your valuable answers.

KRATI

KRATI (Querist)

26 February 2008 sir,
is it right to say that firm-b is firm-a's creditor.
can you describe the relationship between firm a & b.

o.velavan

o.velavan (Expert)

08 March 2008 Yes.firm b is creditor of Firm a if the balance is payable of firm a to firmb