How is the journal entries of banking transactions and know it with example

How is the journal entries of banking transactions and know it with examples?

Friends, today we will discuss about the journal entries of banking transactions in this article. This is the fifth part of the journal entries. Before understanding this part, you must read the first four sections. Because the 3 rules of accounting are the same in all types of journal entries.

Friends, there are many types of transactions in banking. You will enter almost all those transactions in front of you. Before you see the example of banking journal entries, you are placing the rules of accounting in front of you.

Real Account: Debit what comes in
Credit what goes out
Personal Account: Debit the receiver
Credit the giver
Nominal Account: Debit all expenses and losses
Credit all income and gains

Let us now see the journal entries of banking transactions with examples: –

1. When cash is deposit into bank:

If you deposited cash in the bank, is there anything coming? But here is the receiver, then who is the receiver – the bank. Because deposited their money in the bank. Therefore, the bank will be debit a / c. On the other hand, cash has been taken from you. The rules are – Credit what goes out. Then it will be credit.

Bank A / c Dr. ….
To Cash A / c ….
(Being cash deposit into bank)

2. When cash is withdrawn from Bank:

You withdrew cash from the bank. This means you are getting cash. Here the rules apply – Debit what comes in. Thus, your account will be debit. On the other hand, the bank is the giver. So, the rule for Giver is – Credit the giver.

Cash A / c. Dr ……
To Bank A / c …….
(Being cash withdraw from Bank)

3. When cheque is received from customer:

This shows that you received a check from a customer. So, Real acount rules – Debit what comes in. Therefore, the cheque will be entry into the debit account. Then, who is the giver of cheque – customer. Hence the customer account will be credit.

Cheque In-hand A / c Dr. …..
To Customer A / c ……
(Being cheque received from customer)

4. When the cheque is deposit into Bank:

The above statement is: When cheque is receive from customer and then here is the statement: When the check is deposit into Bank. Here you will have to remember about cheque related transactions that same day you received cheque and deposited it in the bank. Then only one transaction will be considere. And if cheque is found today and deposited in the bank the next day, there will be separate entries. In this way the entries will be-

Bank A / c Dr. …..
To check in-hand A / c …..
(Being cheque deposit into bank)

Here, Debit the receiver because receiver is bank, hence Bank A / c Will be debit. And credit what goes out, because cheque is going out of your hands. Therefore, cheque in hand will be credit side. Such an entry will occur when a transaction has occurred on a separate date.

5. If the cheque deposit into bank same day:

Now if, on a single date, you got a cheque from the customer and you also deposit it in the bank. Then the entry will be made as follows –

Bank A / c Dr. …..
To Customer A / c …..
(Being payment received through cheque into Bank from customer)

Here, you saw that the cheque did not stop to you . It was deposit in your bank account on the same day. Therefore a single transaction will be consider. Here, there is the bank receiver. Because the money has not come directly to you, it has come to your bank account. Therefore, the debit occurred and the customer is Giver. That’s why credit happened.

Always keep in mind that if you make payment to a person or party from the bank. Then use the word “Bank” for payment. Because you are transferring money from your bank account to his account.

Personal A / c Dr. …….
To Bank A / c ……….

Friends, a business does not have to pay only for purchasing goods, but in addition there are many types of payments. Such as – Salary payment of employees.

This is also the expenses and losses in the nominal account. You paid with salary check.

Expenses A / c Dr. …….
To Bank A / c ………
(Being salary paid by cheque)

Take care that never write cheque in payment. Write cheque when it is receive.

6. If customer directly deposited amount in Bank:

Bank A / c Dr. …..
To Customer A / c …..
(Being directly deposited amount in bank by customer)

Friends, the customer did not give the cash in your hand and directly deposited it in your bank account. Because the receiver here is not you but the bank. Therefore the bank account will debit. Also, giver is the customer. Therefore, the customer account will be a credit.

7. If the payment is made by cheque:

Suppose you paid to Raju, but made that payment in cash rather than in cash. Then the entry will be –

Raju’s A / c Dr. ….
To Bank A / c ….
(Being paid to Raju by cheque)

Here, Raju is the receiver. Hence there will be entry in debit account. On the other hand, the bank account will have entry to the credit account. Now you must be thinking that you gave cheque, so why the bank account was credited. So, friends, you did give cheque, but the money has been debited from your bank account. In other words, if you pay by check then the bank account is written in the credit account. The check will be written when you receive the check.

8. When cash is withdrawn from Bank for personal use:

Drawing A / c Dr. …..
To Bank A / c ………
(Being cash withdrawal from bank for personal use)

You made a withdrawal from the bank for your personal use. You may have taken it out in cash, but will consider it only as a withdrawal because, you have not withdrawn that money for the purpose of business.

9. When interest is charged by bank:

Interest A / c Dr. ….
To Bank A / c …..

Friends, when the bank charges interest on your account, then it takes it from your bank account only. Hence the interest account became the receiver while doing journal entries. Therefore, it will be debited. On the other hand, bank account will be written in the credit column because, it is giver.

10. When interest is received by bank:

When the bank does not ask for interest in cash then it does not give. The interest transaction takes place from your bank account only. Therefore, when the bank gives you interest. In other words, when you receive interest then you will enter that account in this way –

Bank A / c Dr. …..
To Interest A / c …..

If there are some bank charges like, brokerage charges, ATM charges, sms charges.

This type of services charges that the bank keeps on taking from your account.

Bank charges A / c Dr. ….
To Bank A / c ….