Which of the following entries correctly records a bank service charge in the books?

• A. Debit Cash; Credit Bank Fees
• B. Credit Cash; Debit Bank Fees
• C. Debit Bank Fees; Credit Accounts Receivable
• D. Debit Bank Fees; Credit Cash

Answer: (D)

When a bank charges a service fee, you’re recognizing an expense and reducing cash. In double-entry accounting, expenses are increased with a debit, and cash (an asset) is decreased with a credit. Therefore the correct recording is to debit the Bank Fees expense and credit Cash. This shows the incurred expense and the outflow of cash.

Choosing a different approach would either increase cash (debiting Cash), or reduce the expense (crediting the Bank Fees), or involve an unrelated account like Accounts Receivable. The only entry that correctly reflects paying the bank service charge is debiting Bank Fees and crediting Cash.