Apple Inc.’s iTunes® provides digital products, such as music, video, and software, which can be downloaded to portable devices such as the iPhone® and iPad iTunes are made with credit cards that are on file with the credit card processing company. Such transactions are considered cash transactions. Once the purchases are made, consumers can download the requested digital products to their portable devices for their enjoyment and the charges will show up on their credit card bills.
a. What kind of e-commerce application is described by Apple iTunes?
b. Assume you purchased 12 songs for $1.25 each on iTunes. Provide the journal entry generated by Apple’s e-commerce application.
c. If a special journal were used, what type of special journal would be used to record this sales transaction?
d. If an electronic form were used, what type of electronic form would be used to record this sales transaction?
e. Would it be appropriate for Apple to use either special journals or electronic forms for sales transactions from iTunes? Explain.
Answer:
a. iTunes is an example of a B2C, or business-to-consumer, e-commerce application. The B, or business, is Apple. The C, or consumers, would mostly be individuals who purchase digital products from the download store.
b. Cash 15
Fees Earned 15
c. The cash receipts journal would be used to record debits to Cash from cash sales or collections on account.
d. The electronic invoice form could be used for either transactions on account, as illustrated in the chapter, or for cash sales. The invoice form used for sales on account is different from the one used for cash sales. The latter invoice form
makes a debit to Cash, rather than a debit to a customer account.
e. Sales made on B2C e-commerce transactions are computerized transactions, so a special journal is inappropriate. On an e-commerce site, the consumer
inputs the transaction information on the web page; thus, there is no need for a separate electronic form for reentering the same information to record the sale. Essentially, the e-commerce application is the form that originates the sales transaction inside the accounting system. Accounting transactions flow directly from the shopping cart information directly into the accounting system.