A sale to a customer who uses a credit card that is not issued by a bank, such as
American Express, is recorded as a sale on account. The seller or a clearing-house must
collect the receivable. Upon receiving notice of the sale, the issuing company, such as
American Express, periodically remits the amount of sales less a service fee. The ser-
vice fee is recorded as an expense.
To illustrate, assume that during January Online Solutions sold merchandise cost-
ing $68,000 to American Express customers for $100,000. At the end of January,
Online submitted a bill to American Express and received cash less a 4% service fee
on February 15. The entries to record the sales and the receipt of cash are shown at the
top of the next page.222 Chapter 5 Accounting for Merchandise Operations
GENERAL Controlling Accounts
LEDGERCashAmerican
ExpressSuppliesSamsung
Combo DriveABC
SuppliesAccts. Rec. Merch. Inv. Accts. Pay.Jan Cherry Intel Processor Foust Inc.Olson Inc. Win TV Nora Mayo LLCAccts. Rec.
Subsidiary
LedgerMerch. Inv.
Subsidiary
LedgerAccts. Pay.
Subsidiary
LedgerCapital Stock Retained Earn.Exhibit 10
General Ledger, Controlling Accounts, and Subsidiary Ledgers for Online Solutions
Dec. 31 76,080
Dec. 31 62,150
Dec. 31 22,420
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76,080 62,150 22,420⎫
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maintained for other accounts, such as the merchandise inventory and accounts payable
accounts. The relationship between the general ledger, controlling accounts, and
subsidiary ledgers is shown in Exhibit 10 for Online Solutions.Dec. 31 7,500Dec. 31 1,050Dec. 31 3,760Dec. 31 1,560Dec. 31 1,000Dec. 31 800 Dec. 31 540Dec. 31 680 Dec. 31 310