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Credit cards are either nonbank (e.g. American Express) or bank (e.g. VISA and MasterCard) charge cards that customers use to purchase goods and services. For some businesses, uncollectible account losses and other costs of extending credit are a burden. Businesses can pass these costs (and risks) on to banks and agencies issuing national debit or credit cards. The banks and credit card agencies then absorb the uncollectible accounts and costs of extending credit and maintaining records. Yeah! This takes the responsibility off your business but do the bank and credit card agencies take the cost and risk for free? Of course not — usually, banks and agencies issue credit cards to approved credit applicants for an annual fee. Our business also agrees to pay the percentage fee (typically between 2 and 6% of sales) charged by the bank or credit agency. These costs can get expensive and some companies decide it costs too much to honor specific credit cards (ever wonder why some businesses will not accept American Express or Discover? or have a minimum transaction amount requirement to use credit or debit cards?)
The seller’s accounting procedures for credit card sales differ depending on whether the business accepts a nonbank or a bank credit card. To illustrate the entries for the use of non bank credit cards (such as American Express), assume that a restaurant American Express invoices amounting to $ 1,400 at the end of a day. American Express charges the restaurant a 5% service charge on the total American express sales . The restaurant uses the Credit Card Expense account to record the credit card agency’s service charge and makes the following entry:
The restaurant mails the invoices to American Express. Sometime later, the restaurant receives payment from American Express and makes the following entry:
To illustrate the accounting entries for the use of bank credit cards (such as VISA or MasterCard), assume that a retailer has made sales of $ 1,000 for which VISA cards were accepted and the service charge is 3% of sales. VISA sales are treated as cash sales because the cash will be deposited the next day. The retailer deposits the credit card sales invoices in its VISA checking account at a bank just as it deposits checks in its regular checking account. The entry to record this deposit is:
Conclusion
Commercial bank loans, without a doubt, play an essential part in the republic's economy. It aids in the strengthening of individuals' and legal entities' material and technological bases, as well as the construction, restoration, and expansion of fixed and circulating production assets. It will enable businesses and organizations to be unrestricted by their own capital, to inject fresh money into the economy, and to build the essential economic foundation for production development and acceleration. Banks, in turn, are the primary source of extra borrowing in a variety of sectors of the economy, attracting capital to restructure production processes, pursue an active economic strategy, foster entrepreneurship, and improve production efficiency.
The course work reveals that capital, which is the most important factor in commercial banks' lending ability in the country, as well as deposits and deposits of legal organizations attracted by them, is increasing year after year. Our state makes improving the financial system's stability, strengthening their resource base, and maintaining a steady increase in capitalization a priority every year. This directly leads to an increase in commercial banks' lending capacity and, as a result, an increase in their participation in the economy's modernization process.
A debit card is a payment card that deducts money directly from a consumer’s checking account when it is used. Also called “check cards” or "bank cards," they can be used to buy goods or services; or to get cash from an automated teller machine or a merchant who'll let you add an extra amount onto a purchase.
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