Bank Charges

This Overheads code records the cost of bank charges incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Retail and hospitality

A shop or restaurant taking a high volume of small transactions accumulates card-machine transaction fees and cash-handling charges for paying in daily takings — together, say, £68 in a month. Bank charges for operating an account are an exempt financial service, not a taxable supply, so there's no VAT to reclaim: a debit of £68 to 7901 (Bank Charges) and a credit of £68 to 1200 (Bank Current Account).

Import and export

A business paying overseas suppliers regularly incurs charges for international wire transfers (SWIFT/CHAPS payments) and correspondent bank fees, each one running considerably higher than a domestic transfer fee — say £35 per payment versus a few pence for a domestic one. A month with several supplier payments abroad might total £210, again a straight debit of £210 to 7901 and a credit of £210 to 1200 with no VAT line.

Commonly confused with

Because code 7900 (Bank Interest Paid) sits right next to this one in Overheads, it's a common mis-posting target. Code 7901 is specifically for bank charges, while 7900 covers bank interest paid — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Bank Charges won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads