FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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### Understanding Accounting Transactions

When processing accounting transactions, it's important to accurately record debit and credit entries in the appropriate accounts. Below are examples of such transactions for educational purposes. 

#### Example Transactions

1. **Tony's Restaurant Visa Payment**
   - Tony's Restaurant accepted a Visa card in payment for a $175 lunch bill. The bank charges a 4% fee. What entry should Tony's make?

2. **Larkin Company Accounts Receivable Sale**
   - Larkin Company sold its accounts receivable of $60,000. What entry should Larkin make, given a service charge of 3% on the amount of receivables sold?

#### Journal Entries

- **Transaction a**:

  **Account Titles and Explanation | Debit ($) | Credit ($)**
  - Accounts Receivable (from Visa) | 168 |   
  - Credit Card Expense              | 7   |   
  - Sales Revenue                    |     | 175

  *Explanation*: This entry records the Visa card transaction, where $168 is debited to Accounts Receivable (net of the 4% fee of $7), and the Sales Revenue is credited for the full amount of $175.

- **Transaction b**:

  **Account Titles and Explanation | Debit ($) | Credit ($)**
  - Cash                             | 58,200 |   
  - Service Charge Expense           | 1,800  |   
  - Accounts Receivable              |        | 60,000

  *Explanation*: This entry records the sale of accounts receivable with a 3% service charge. $58,200 is debited to Cash, $1,800 is debited to Service Charge Expense, and $60,000 is credited to Accounts Receivable.

### List of Accounts

- Accounts Receivable
- Credit Card Expense
- Sales Revenue
- Service Charge Expense
- Cash
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Transcribed Image Text:### Understanding Accounting Transactions When processing accounting transactions, it's important to accurately record debit and credit entries in the appropriate accounts. Below are examples of such transactions for educational purposes. #### Example Transactions 1. **Tony's Restaurant Visa Payment** - Tony's Restaurant accepted a Visa card in payment for a $175 lunch bill. The bank charges a 4% fee. What entry should Tony's make? 2. **Larkin Company Accounts Receivable Sale** - Larkin Company sold its accounts receivable of $60,000. What entry should Larkin make, given a service charge of 3% on the amount of receivables sold? #### Journal Entries - **Transaction a**: **Account Titles and Explanation | Debit ($) | Credit ($)** - Accounts Receivable (from Visa) | 168 | - Credit Card Expense | 7 | - Sales Revenue | | 175 *Explanation*: This entry records the Visa card transaction, where $168 is debited to Accounts Receivable (net of the 4% fee of $7), and the Sales Revenue is credited for the full amount of $175. - **Transaction b**: **Account Titles and Explanation | Debit ($) | Credit ($)** - Cash | 58,200 | - Service Charge Expense | 1,800 | - Accounts Receivable | | 60,000 *Explanation*: This entry records the sale of accounts receivable with a 3% service charge. $58,200 is debited to Cash, $1,800 is debited to Service Charge Expense, and $60,000 is credited to Accounts Receivable. ### List of Accounts - Accounts Receivable - Credit Card Expense - Sales Revenue - Service Charge Expense - Cash
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