Journal entry for note collected by the bank
Overview
The company may use the note receivables collection service that the bank provides. In this case, the company needs to make the journal entry for note collected by the bank when it is shown on the company’s bank statement.
The company usually makes the journal entry for the note collected by the bank as part of adjusting the book balance when performing the bank reconciliation. This is because it usually cannot make any record of notes receivable collected by the bank yet until it receives the bank statement for the period. This leads to the difference between the cash balance on the company’s record and the cash balance on the bank statement.
Journal entry for note collected by the bank
The company can make the journal entry for note collected by the bank by debiting the cash account and bank service charges account for fee charged and crediting the notes receivable account and interest revenue account.
| Account | Debit | Credit |
|---|---|---|
| Cash | 000 | |
| Bank service charges | 000 | |
| Notes receivable | 000 | |
| Interest revenue | 000 |
Example of note collected by the bank
For example, while performing the bank reconciliation in June, the company ABC sees on the bank statement that a $1,000 note has been collected by the bank together with the interest on the note of $60 which the company has not recorded yet. Also, an amount of $15 was charged as a collection fee by the bank.
In this case, the company ABC can make the journal entry for the note collected by the bank in the month of June as below:
| Account | Debit | Credit |
|---|---|---|
| Cash | 1,045 | |
| Bank service charges | 15 | |
| Notes receivable | 1,000 | |
| Interest revenue | 60 |
This journal entry is necessary for the cash balance on the company’s record to match the cash balance on the bank statement after the company prepares the bank reconciliation statement.
