Journal Entry for Opening Bank Account

Opening a bank account is the process that company creates a new account in the bank.

Company opens new bank account based on their need and requirement. Sometimes they require to use a new bank account which enables them to pay the supplier more easily. It also can help to increase the company’s revenue, as well as help customers, pay the company.

When opening a new account, most banks will require the company to deposit at least the minimum to keep the account active. All customers have to comply with the bank policy.

The company has to create a new chart of account to represent the new account. It will allow the accountant to control the accounts easily. They will record the new bank transaction into the new chart of account as well. It will ensure all bank transactions are recorded in the correct account from the beginning.

At the end of the month, the accountant has to perform the bank reconciliation. They compare the bank statement balance and the trial balance. Both balances should be the same except there are reconciling items. All transactions on the bank statement must be the same as company bank account transactions. The reconciling items have to be investigated and kept followed up next month.

Accountant can use the detail of bank accounts and include them in the company chart of account. The detail includes type of account, bank name, and account number. It allows the accountant to record the transaction correctly and prevent any confusion between accounts.

Journal Entry for Opening Bank Account

When the company opens new accounts, they have to deposit cash at least the minimum balance. They have to record the movement of cash to the new bank account. Most of the time, the company will deposit cash on hand into the new bank.

The journal entry is debiting cash at bank and credit cash on hand.

The transaction will increase the cash at bank on the balance sheet. It also reduces the cash on hand balance if the company use it to deposit into the bank.

Example

Company ABC has decided to open a new bank account in JPMorgan. The bank requires the customer to deposit at least $ 100 to open a new account. After opening the account, the company decides to deposit $ 500 by using the cash on hand. Please prepare the journal entry for opening a new bank account.

ABC has opened new bank account and deposited $ 500. Accountant has to create new chart of accounts to reflect this new account. After that, they have to record the cash deposit into the bank.

The journal entry is debiting cash at bank $500 and credit cash on hand of $ 500.