A customer charges a treadmill at Mike's Sport Shop.The price is €2,000 and the financing charge is 9% per annum if the bill is not paid in 30 days.The customer fails to pay the bill within 30 days and a finance charge is added to the customer's account. The accounts affected by the journal entry made by Mike's Sport Shop to record the finance charge are

Question

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The finance charge increases the amount owed by the customer, so Accounts Receivable is debited. The finance charge is considered interest revenue for Mike's Sport Shop, so Interest Revenue is credited.

A Customer Charges a Treadmill at Mike's Sport Shop