Mastering Bank Accounting Entries

Bank Transactions

Bank transactions are central to modern business operations, as most financial activities are processed through checking, savings, or credit accounts. These entries reflect the movement of funds into and out of the business via electronic transfers, checks, direct deposits, and bank loans. Properly recording these activities is vital for accurate bank reconciliations and cash flow management.

Bank-related entries include receiving loan funds to finance operations, making loan repayments, receiving payments from customers through bank channels, and transferring funds between accounts. They also include handling bank fees, bounced checks (NSF), and credit card transactions. Unlike cash entries, bank transactions often involve third-party timing (e.g., delayed postings, processing windows), so they require careful monitoring and reconciliation with bank statements.

Bank Loan Received
Debit: Bank Account
Credit: Loan Payable
Example: Business receives a $10,000 bank loan.
Dr Bank $10,000
Cr Loan Payable $10,000
Bank Loan Repayment
Debit: Loan Payable, Interest Expense (if applicable)
Credit: Bank Account
Example: Business repays $2,000 of loan principal and $200 in interest.
Dr Loan Payable $2,000
Dr Interest Expense $200
Cr Bank $2,200
Bank Interest Earned
Debit: Bank Account
Credit: Interest Income
Example: Bank deposits $50 interest.
Dr Bank $50
Cr Interest Income $50
Bank Transfer to Savings
Debit: Savings Account
Credit: Checking Account
Example: $1,000 transferred from checking to savings.
Dr Savings Account $1,000
Cr Checking Account $1,000
Direct Deposit from Customer
Debit: Bank Account
Credit: Accounts Receivable
Example: Customer pays $5,000 via ACH transfer.
Dr Bank $5,000
Cr Accounts Receivable $5,000
Bank NSF Check Returned
Debit: Accounts Receivable
Credit: Bank Account
Example: A $300 customer check bounces.
Dr Accounts Receivable $300
Cr Bank $300
Check Issued to Vendor
Debit: Accounts Payable or Expense Account
Credit: Bank Account
Example: Business pays vendor $750 via check.
Dr Accounts Payable $750
Cr Bank $750
Check Received from Customer
Debit: Bank Account
Credit: Accounts Receivable
Example: Customer pays $1,200 with a check.
Dr Bank $1,200
Cr Accounts Receivable $1,200
Wire Transfer Fee
Debit: Bank Charges Expense
Credit: Bank Account
Example: Bank deducts $30 for an outgoing wire transfer.
Dr Bank Charges Expense $30
Cr Bank $30
Credit Card Payment Made
Debit: Credit Card Payable
Credit: Bank Account
Example: Payment of $2,000 toward credit card bill.
Dr Credit Card Payable $2,000
Cr Bank $2,000 Debit: Credit Card Payable
Credit: Bank Account
Example: Payment of $2,000 toward credit card bill.
Dr Credit Card Payable $2,000
Cr Bank $2,000