Bank Service Charge
Overview
In accounting, the company usually finds out about the actual amount of the bank service charge when it makes the bank reconciliation. Likewise, it needs to make the journal entry for this bank service charge as such service charge is usually not accounted for yet until the company makes the bank reconciliation.
Bank service charge journal entry
The company can make the bank service charge journal entry by debiting the bank service charge account and crediting the cash account.
| Account | Debit | Credit |
|---|---|---|
| Bank service charge | 000 | |
| Cash | 000 |
In this journal entry, the bank service charge is an expense account in the income statement. Likewise, this journal entry increases the expense in the income statement and decrease the cash in the balance sheet.
Sometimes, due to the insignificant amount of the bank service charge, the company may use the miscellaneous expense to record such fee charges instead. In this case, there is usually no bank service charge account and the journal entry be the debit of miscellaneous expense account and the credit of cash account instead.
| Account | Debit | Credit |
|---|---|---|
| Miscellaneous expense | 000 | |
| Cash | 000 |
Bank service charge example
For example, in the bank reconciliation, the company finds that the bank charges the service for $15 which it has not recorded in the book balance yet.
In this case, the company ABC can make the bank service charge journal entry for the adjusting of the balance per book in the bank reconciliation as below:
| Account | Debit | Credit |
|---|---|---|
| Bank service charge | 15 | |
| Cash | 15 |
Example 2:
Assuming the company ABC in the example above does not have the bank service charge account due to the amount is too insignificant, hence, it doesn’t bother to create the bank service charge account in the chart of account. In this case, it can use the miscellaneous expense account to record the bank service charge instead.
Likewise, the journal entry for the $15 bank service charge in the example above will become like below instead:
| Account | Debit | Credit |
|---|---|---|
| Miscellaneous expense | 15 | |
| Cash | 15 |
