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    Accounting for Travelers checks sold by a bank

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    A bank sells a customer $500 of American Express traveler's checks for which the bank collects from the customer $505. (The bank charges 1% fee for this service.) How does the bank record this transaction? How does this transaction affect American Express' balance sheet?

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    https://brainmass.com/business/accounting/travelers-checks-example-problem-120721

    Solution Preview

    The bank collected funds as an agent for American Express and the entry will record a liability payable.

    The bank earned the service fee and will record it as current income.

    So the bank's entry is debit cash for $505, ...

    Solution Summary

    The solution explains the theory of recording travelers checks transactions including the source of revenue and the timing of revenue recognition.

    $2.19

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