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ACCA Applied Knowledge · Financial Accounting · General ledger accounts and journal entries

At the month end, the cash book shows a bank charge of $120 and a dishonoured customer cheque of $900, neither yet entered in the general ledger. What journal entries are needed?

Debit Bank charges $120 and Trade receivables $900, and credit Bank $1,020. The charge is an expense, while the dishonoured cheque means the customer owes the money again, so the receivable is reinstated.

  1. ADebit Bank charges $120 and Trade receivables $900; credit Bank $1,020Correct
  2. BDebit Bank $1,020; credit Bank charges $120 and Trade receivables $900
  3. CDebit Bank charges $120 and Sales $900; credit Bank $1,020
  4. DDebit Trade receivables $120 and Bank charges $900; credit Bank $1,020

Explanation

Both items reduce the bank balance, so bank is credited $1,020 in total. The bank charge is an expense, debited $120. A dishonoured cheque reinstates the customer's debt, so receivables is debited $900. Crediting sales would be wrong because the original sale was already recorded.

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