Question

A company writes a check but does not have enough money to cover the balance. What is the journal entry for the charge assessed by the bank?

Answer 1

Answer:

Journal entry would be as:

Service Charge Fee A/c.................Dr      XXXX

      To Cash A/c.........................................Cr   XXXX

Explanation:

The bank will debit the service charge fee as it is assessed by it to the account of the company. So, cash is going out of the company and any asset is decreasing will be credited. Therefore, the cash account is credited. And it is paid or assessed against the service charge fee. Therefore, the service charge fee account is debited.