Debit and credit cards are commonly accepted by companies when customers make purchases. Because the cash is efficiently and safely transferred directly into a company’s bank account by the debit or credit card company, such transactions enhance internal control over cash. However, the seller is typically charged a fee for accepting debit and credit cards. For example, assume BDCC makes a $1,000 sale to a customer who uses a credit card that charges BDCC a fee of 2%; the cost of the sale is $750.
BDCC would record the following entries:
The credit card fee is calculated as the $1,000 sale x 2% = $20. This means that BDCC collects net cash proceeds of $980 ($1,000 - $20). The use of debit cards also involves fees. These entries are journalized in the same manner.
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