Credit card accounting entry - doubts

Hi ,

I need help with an accounting entry and with some basics where a sale has been done using debit or credit card. I checked some examples online where say the sale is of 1000 rs and card charges are 4 %. Accounting entry is 

      Cash                  960                  Dr

      Card Charge         40                  Dr 

To  Sales                1000  

https://www.double-entry-bookkeeping.com/sales/credit-card-sales/

My first query is that how is this a Cash debit when physically there is no cash and amount is transferred to the bank. ( sorry for my ignorance i have a science background and i am getting the understand accounts ).  Shouldnt it be CreditCard A/c on the Debit side which explains that the payment is in done using Card.

 Secondly in this example it seems that the shop is paying for  the card charges. What will be the accounting entry if the charges are borne by the customer and not the shop that the shop takes Rs 1040  for the customer. In such a case is the following accounting entry correct. 

      CreditCard A/c    1000                  Dr

      Card Charge          40                  Dr 

To  Sales                1040  

Thanks for your time.

Replies (3)

your entries seem to be right, except that i feel current account should be used instead of credit card account and bank charges for card charges

Dear Mitesh

 

 

A thing came to my mind that in you second entry why will sale increase by Rs. 40.

 

 

The sale should remain at Rs. 1000 in my view. Just because we are recovering Rs. 40 from customer shouldnt increase our revenue. These Rs. 40 isnt increasing our income but will go to the bank.

 

 

Regards

Hi Shivani, 

Thank you for the replies. Yes you are right. The sales will not increase by Rs 40.

The entry should be.

Bank                             1040 Dr

To Sales                       1000 Cr

 BankCharges               40 Cr

Just one thing about my first question, why does the link I posted contain Cash Dr entry, should it be Bank ?

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