bank to bank transfer journal entry. When a business transfers funds from one bank account to another, it needs to record the transaction accurately in its accounting records. This type of transaction is common and straightforward, involving a debit to one bank account and a credit to another.
Key Concepts
- Debit: Increases an asset account.
- Credit: Decreases an asset account.
Journal Entry for Bank to Bank Transfer
When funds are transferred from one bank account to another, the following journal entry is made:
Example Scenario: Bank to Bank Transfer
Assume a business transfers ₹50,000 from its primary bank account (Bank A) to its secondary bank account (Bank B) on 10-07-2023.
Step-by-Step Journal Entry
- Record the Bank to Bank Transfer
| Date | Account Title | Debit (INR) | Credit (INR) | Description |
|---|---|---|---|---|
| 10-07-2023 | Bank B | 50,000 | Transfer from Bank A to Bank B | |
| 10-07-2023 | To Bank A | 50,000 | Transfer from Bank A to Bank B |
Explanation
- Debit to Bank B: This increases the balance in Bank B, reflecting the receipt of funds.
- Credit to Bank A: This decreases the balance in Bank A, reflecting the transfer of funds out of the account.
Conclusion
Recording bank to bank transfers ensures that the business’s financial statements accurately reflect the movement of funds between bank accounts. Properly managing these transactions helps maintain accurate and reliable financial records.