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Journal Entries | Banking Transactions (Part-1)

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  • Last Updated : 16 May, 2022

Recording of Banking Transactions:

All businesses make many transactions with the bank in their day-to-day activities. Journal Entries related to banking transactions are as follows:

1. When cash is deposited in the bank:

Journal Entry: 

 

Example: Cash is deposited in the bank ₹10,000.

Solution:

 

2. When cash is withdrawn from the bank:

Journal Entry: 

 

Example: Cash is withdrawn from the bank ₹2,000.

Solution:

 

3. When cash is withdrawn from the bank for personal use:

Journal Entry: 

 

Example: Proprietor withdrew cash from the bank for his personal use ₹5,000.

Solution:

 

4. When the cheques, drafts, etc., received from the customers are not sent to the bank for collection on the same date and deposited at the bank on any other day or endorsed to any other party.

A. When any cheque is received and not sent to the bank for collection:

Journal Entry: 

 

Example: 01 April 2022- A cheque of ₹11,000 was received from Bijay.

Solution: 

 

B. When the above cheque was sent to the bank for collection: 

Journal Entry: 

 

Example: 05 April 2022- Cheque received from Bijay was sent to Bank.

Solution: 

 

Or

C. If the above cheque was endorsed in favour of any other party:

Journal Entry: 

 

Example: 05 April 2022- Cheque received from Bijay was endorsed to Nupur.

Solution:  

 

5. When the cheques, drafts, etc., received from the customers are sent to the bank for collection on the same date:

Journal Entry: 

 

Example: A cheque of ₹5,000 was received from Sayeba and deposited in the bank on the same day.

Solution:

 

6. When a customer directly deposits any amount in the firm’s bank account:

Journal Entry: 

 

Example: Gaurav, a debtor, deposited ₹20,000 directly into the firm’s bank account.

Solution:

 

7. When a cheque previously deposited into the bank gets dishonoured:

Journal Entry: 

 

Example: Cheque received from Sayeba ₹5,000, which was earlier deposited into the bank gets dishonoured. 

Solution:

 

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