Hi guys: my client wants to put a pre-calculated interest amount and receive funds against it.
So if the invoice is $100 net 15 days... there would be a $3 finance charge if paid after the 15th day.
When the customer pays on the 20th day, he/she pays $103.
Sequence of entries are as follows:
Invoice
1) Dr. Customer $100
Cr. Revenue $100
Cash receipt
2) Dr. bank $103
Cr. Customer $100
Cr. Interest Income $3
Here are my questions:
1- Are these the correct accounting entries?
2- We receive our money via lockbox. How will the system know to automcatically charge off the difference to the interest income account?
thanks very much
Brian