Checking account

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

A special checking account simplifies the reconciliation of the general account by avoiding a large number of relatively small outstanding checks. It also simplifies recordkeeping in that a separate cash disbursements journal can be maintained for each account.
When it is necessary for a company to write a large number of checks for a particular purpose, it may be appropriate to establish a special account to simplify control and monthly reconciliation. Such accounts are commonly used for payroll, dividends and interest on bonds.
When the total amount to be paid out is calculated, a transfer is made from the general to the special checking account. If the payroll department of the Sample Company computes the net salaries and wages for the next payday as $47,542, a journal entry would be made to record the transfer of this amount to the Cash—Payroll Account.
checking account journal entry
Then, Payroll checks are written and this entry is recorded:
checking account journal entry
Consequently, the book balance in the CAsh–Payroll Account (as well as other special checking accounts) is virtually always zero. The bank balance equals the sum of the outstanding checks.
A special checking account simplifies the reconciliation of the general account by avoiding a large number of relatively small outstanding checks. It also simplifies recordkeeping in that a separate cash disbursements journal can be maintained for each account.

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