If a company recorded a $5,500 credit card transaction and the credit card discount was 4%,what is the correct entry to accounts receivable?
A)Dr.Accounts Receivable $5,720
B)Dr.Accounts Receivable $5,280
C)Cr.Accounts Receivable $5,720
D)Cr.Accounts Receivable $5,280

Question

Quizplus · Accepted Answer

To record a credit card transaction with a discount, we need to use a contra revenue account called "Credit Card Discount" and reduce the sales amount by 4%.

The correct entry would be:

Dr. Accounts Receivable $5,500
Cr. Sales $5,500
Cr. Credit Card Discount $220 [($5,500 x 0.04) or ($5,500 x 4%)]

This entry reduces the sales amount by the discount and records the full amount in accounts receivable.

Therefore, the correct answer is B, which records the full amount in accounts receivable without the discount.

If a Company Recorded a $5,500 Credit Card Transaction and the Credit