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?© BrainMass Inc. brainmass.com March 4, 2021, 7:45 pm ad1c9bdddf
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, ...
The solution explains the theory of recording travelers checks transactions including the source of revenue and the timing of revenue recognition.