Guide For Managing BANK ACCOUNTS

The accounting of banks concerns companies that have relationships with one or more banks for the financial activities necessary to carry out their business and to achieve corporate objectives. Within these relationships, commissions and interest are usually paid on the financial activities carried out. In addition, sometimes loans or mortgages are taken out for the purchase of capital goods such as office machines, production machinery, vehicles… or even for the purchase of properties to be used for the business. In these cases installments are paid which have a principal amount and an interest share and any commissions to be correctly recorded in the accounting.

BANK COMMISSIONS

Many banking operations involve direct debit of a commission. The most classic example is the execution of a bank transfer. Proper accounting management requires these commissions to be charged to a specific account in the Costs of the Income Statement. In this way, at the end of the year, in the budget phase, the costs paid to the banks through the charging of commissions will be clear. The analysis of this account is also useful because it allows you to view and evaluate one of the “hidden” costs that sometimes have an important impact on the operating result.

In our example, the commissions are all charged to the same account but, if more detail is desired, specialized sub-accounts can be created, for example to divide the commissions by individual bank, or by type of cost (bank transfers, RiBa, etc.). Let’s see an example of how to register the execution of a transfer to a supplier with a charge of commissions.

And as usual here is the same entry in Amica Contabilità

Accounting registration of a transfer to a supplier with commission charges

In addition to the immediate commissions, periodic costs are also usually paid, such as for example the maintenance of the current account, the legal stamps and other expenses that are usually reported and debited at the end of each quarter in the account statement. Therefore, these expenses will also be recorded and recorded in each quarter. If you work with a passive (debit) account, the accrued interest is also debited in the statement. Let’s see an example of how to record the data collected at the end of the quarter from a bank statement:

Recording of the data collected at the end of the quarter from a bank statement

LOANS AND MORTGAGES

In carrying out the activity it may happen that you need to take out a loan with a bank, in the form of a loan or a mortgage. The reasons can be various, both operational (purchase of machinery, equipment, etc.) and financial (liquidity, debt reorganization). In all these cases, a loan or loan agreement is stipulated with the bank following which a periodic installment (monthly, quarterly or other) must be paid divided into interest and principal. Sometimes there is also a collection fee.

When a loan is received, the funded amount is usually paid into a current account available to the company to make the payments for which it was granted. Let’s now see how to proceed to record the operation. It is necessary to create a specific account for the loan / mortgage in the liabilities of the Balance Sheet where the debt is recognized with a specific registration that we see below.

Registration relating to the taking out of a bank loan

In this way we have clear evidence in the accounts of the debt created with the loan. In subsequent registrations of the payment of the installments, the principal amount will be deducted from time to time from this account until it is completely zeroed when the loan has been fully repaid.

Suppose we have stipulated the loan of € 20,000.00 with repayment in 36 monthly installments and an interest rate of 6%: we will have an installment of € 608.44. We will have an amortization plan like the one shown in the image:

A typical amortization plan relating to a bank loan

The amortization plan shows for each installment the principal amount returned and the interest paid. Let’s see how the payment of an installment (the first) of the loan is recorded, including the debit of a collection fee of € 1.00:

Registration of the payment of an installment of the loan, collection costs included

As you can see, having the amortization plan available is essential to correctly allocate the principal amount and the interest portion of each installment. Normally the same information can also be detected by the accounting officer issued by the bank for the payment of the single installment.

In this article we have learned how to make the records relating to the main transactions with banks, giving some examples from which you can easily derive the other situations not directly taken into consideration. We also saw how to manage a loan or mortgage and installment payments.

You should have everything you need for bank accounting. As always, I give you an appointment to the next article where we will deal with a fairly complex issue: leasing management in the two forms used by companies, financial leasing and operating leasing. We will evaluate the technical aspects and the impacts on registrations and therefore on the financial statements.