The rule for bank accounts in the nominal ledger is simple: one nominal account for every real account, with the same name and the last four digits of the account number, and nothing posted to it that is not on that account’s statement. Everything else on this page follows from that.
A typical set-up
| Nominal account | What it mirrors | Normal balance | Balance sheet heading |
|---|---|---|---|
| Current account ending 4417 | Main business current account | Debit | Cash at bank and in hand |
| Business savings ending 0932 | Instant access or notice account | Debit | Cash at bank and in hand |
| Tax reserve ending 2208 | Savings account set aside for VAT and corporation tax | Debit | Cash at bank and in hand |
| EUR account ending 6150 | Euro-denominated account | Debit | Cash at bank and in hand |
| Company credit card ending 3391 | Card statement balance | Credit | Creditors due within one year |
| Cash in hand | Notes and coins held on the premises | Debit | Cash at bank and in hand |
Name accounts after the account, not after what you use them for this month. “Ending 0932” stays true; “Savings for new van” stops making sense when you buy the van. Separate accounts for a tax reserve are worth having even though the money is the same company’s: the ledger then shows at a glance how much of the cash is already spoken for.
A euro or dollar account needs its own nominal account in that currency, revalued at each month end; see foreign currency bank accounts.
Credit cards are borrowing
A company credit card is not a bank account in the asset sense. Each purchase increases what the company owes the card issuer. Set it up as a liability, post each card transaction to its expense with the right VAT code, and the monthly repayment from the current account is a transfer:
| Account | Debit | Credit |
|---|---|---|
| Company credit card ending 3391 | £1,862.45 | |
| Current account ending 4417 | £1,862.45 |
The balance at any time should equal the card statement balance, less any transactions since the statement date. In the accounts it is shown with other creditors falling due within one year. Coding individual card spends is covered in company card expenses in bookkeeping.
When a current account goes overdrawn
A current account with an overdraft facility can swing between a debit and a credit balance within a month. Keep it as one nominal account. What matters is the year-end figure: if the account is overdrawn at the balance sheet date, the overdraft is presented under bank loans and overdrafts in creditors due within one year, not as negative cash.
Do not net an overdrawn account against a positive balance at a different bank. Offsetting is only appropriate where there is a legal right to set off and an intention to settle net, which normally needs a formal arrangement with one bank. Overdraft covers facility fees and overdraft interest.
Moving money between your own accounts
A transfer of £5,000 from the current account to savings is neither income nor an expense:
| Account | Debit | Credit |
|---|---|---|
| Business savings ending 0932 | £5,000 | |
| Current account ending 4417 | £5,000 |
With bank feeds, the transfer appears twice: once as money out on the current account feed and once as money in on the savings feed. Record it once, as a transfer, and match both feed lines to that single entry. If your software cannot match both sides at once, post each side to an inter-account transfers clearing account; it should be back to nil as soon as both sides are in. A balance left on it means one side has been missed or a transfer was coded as sales. More on how feeds handle this is in bank feeds.
Reconciling every account, every month
Each nominal account must agree to its statement at the month end. The difference should consist only of items you can name:
- Take the closing balance on the bank statement at the last day of the month.
- Add receipts recorded in the books but not yet on the statement, such as cheques paid in on the last day.
- Subtract payments recorded but not yet cleared.
- The result must equal the nominal account balance exactly.
Anything else, including a difference of a few pence, means something is missing or duplicated. Reconcile savings accounts and credit cards too; they are where interest received and card fees get missed because nobody looks at them. A step-by-step method is in bank reconciliation for UK businesses.
Accounts that sometimes get added and should not be
- A nominal “bank” for a director’s personal account, so business costs they paid personally can be posted to it. Personal spending on business goes through the director’s loan account, not a fake bank.
- Closed accounts left open in the ledger with old balances. When a bank account is closed, transfer any balance out, reconcile to nil and then deactivate the nominal account.
- “Bank – unidentified” used as a dumping ground. Unknown receipts belong in a properly reviewed suspense or clearing account until identified.
Setting up a ledger from scratch? In a free trial of Nexbal you register each bank account, current, savings or currency, as its own sub-ledger under the bank account in the fixed chart and upload its statements.