Expenses & income · Level: Basics
Journal entry: Interest received from the bank
The bank pays interest on a balance. That is income, and the bank balance rises.
Worked example
The bank credits us with £10.00 of interest.
Correct journal entry
Bank £10.00 / Interest income £10.00
Debit
Bank£10.00
Credit
Interest income£10.00
Why?
- Bank: asset increases → debit
- Interest income: income earned → credit
Typical mistake
Debiting interest income: income is credited.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
The bank credits us with £45.00 of interest.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for interest received from the bank?
Example: Bank £10.00 / Interest income £10.00.
How do I recognise this case?
The bank pays interest on a balance. That is income, and the bank balance rises.
What is the typical mistake?
Debiting interest income: income is credited.