credit card entry?

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KRATI (Querist)
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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)
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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)
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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)
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26 February 2008 this is first year of business therefore few information is available.

Srinivas Sharma KN

Srinivas Sharma KN (Expert)
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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)
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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)
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26 February 2008 thank u sir for your valuable answers.

KRATI

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