Question

Interest paid by bank on bank balance rupees 1200 journal entry

Answer 1

Given "interest paid by the bank"

this transaction affects two accounts... interest a/c(bank is paying us interest) an d bank a/c(that interest is added into the bank account by the bank)..bank a/c is a real account(all assets and liabilities come under it..here bank is an asset).. interest a/c is a nominal account(all expenses incomes gains losses come under nominal account...here interest is an income)

the three golden rules of accounting are

personal account - debit the reciever, credit the giver

nominal account- debit all expenses and losses, credit all incomes and gains

real account- debit what comes in, credit what goes out

so in contention with the above rules..Bank account should debitedsince amount is coming in.. interest account should be credited since it is an income...

so the journal entry will be

bank a/c Dr xxxx

To interest a/c xxxx

(being interest added by the bank)

Answer 2

Answer:

bank a/c dr. 1200

to bank interest a/c 1200