Add card in the Accounts Receivable Purchase Agreement

Aug 6th, 2022
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The account statement of credit card payments pending to a business for services or products previously sold. Any business which expects credit card payments has receivables. The payments and transactions are handled either by banks or third party payment settlement companies.
Merchant Card Receivables: Amounts owed by banking companies for sales of goods, services, and/or special functions from credit companies. This account will be used for all credit card sales regardless of the credit card company involved. Additionally, Volume 13, Chapter 3, para 030303 Receivables.
Accounts receivable is money owed to a company by customers for goods or services delivered but not yet paid for. Its recorded as a debit entry in accounting as it increases assets. When a sale is made on credit, accounts receivable is debited and sales revenue is credited.
Accounts receivable (AR) is a core business function: collecting the money that customers owe for goods or services they received on credit. Effective AR management is essential for a business to thrive, as it allows for the maintenance of a healthy cash flow, increases customer satisfaction, and boosts profitability.
Answer and Explanation: Credit card sales can be accounts receivable if the credit is in-house. Most businesses use a third-party merchant to process and pay credit card sales for a nominal fee.
Purchase of Accounts Receivable refers to the bank buying the creditors rights in accounts receivable possessed by the seller (creditor) against the buyer (debtor) under the commercial contract while maintaining the recourse to the debtor. The bank may have the right of recourse to the creditor or not.
Therefore, when a journal entry is made for an accounts receivable transaction, the value of the sale will be recorded as a credit to sales. The amount that is receivable will be recorded as a debit to the assets. These entries balance each other out.

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