Bank a/c                  dr

Journal for Paid into bank for opening a Current Account

When a business or an individual opens a current account with a bank, it is necessary to record the transaction in the accounting books. This transaction involves the payment made to the bank for opening the current account. In order to properly record this transaction, a journal entry needs to be made. The journal entry will include the details of the payment and the account that is affected by this transaction.

Journal Entry:

Date: [Date of the transaction]

1. Debit Bank Account (Current Asset): [Amount paid to the bank]
2. Credit Capital/Owner's Equity Account (Long-term Liability): [Amount paid to the bank]

Explanation:

The journal entry for paying into the bank for opening a current account involves two accounts, the Bank Account (Current Asset) and the Capital/Owner's Equity Account (Long-term Liability). Let's explore the purpose and impact of each account in this transaction.

Debit Bank Account (Current Asset):

- The Bank Account is a current asset account that represents the amount of money the business or individual has deposited into the bank.
- When paying into the bank for opening a current account, the business or individual is essentially transferring funds from their own possession and depositing it into the bank.
- Therefore, the Bank Account is debited to increase the balance and reflect the funds deposited.

Credit Capital/Owner's Equity Account (Long-term Liability):

- The Capital/Owner's Equity Account represents the owner's investment or the business's total equity.
- By opening a current account, the business or individual is investing their own funds into the bank, which increases their capital or owner's equity.
- Thus, the Capital/Owner's Equity Account is credited to reflect the increase in equity due to the payment made into the bank.

Summary:

In summary, the journal entry for paying into the bank for opening a current account involves debiting the Bank Account (Current Asset) to record the funds deposited and crediting the Capital/Owner's Equity Account (Long-term Liability) to reflect the increase in equity. This journal entry accurately records the transaction and allows for proper tracking of the funds deposited into the bank for the current account.