Every account maintained by a bank has its own ledger for recording transactions. Each page of that ledger is called a folio, and it holds a fixed number of transactions. When a folio gets filled, the bank opens a new one. For this, they bill the account holder, and this bill is what the ledger folio charges are. They may appear small, but recording them properly helps in maintaining financial reporting accuracy.
What are ledger folio charges?
Ledger folio charges are simply a fee for record maintenance, deducted at regular intervals, most commonly at the end of each quarter. The number of entries permitted per folio and the fee charged per folio both vary across banks.
In practice, the charge is often overlooked because it does not arrive as a separate notice or alert. It is directly debited from the account without any intimation, which is why many businesses only notice it during reconciliation rather than at the point of deduction.
Who pays ledger folio charges?
Businesses running current accounts bear the ledger folio charges. A current account has records of payments to vendors, collections from customers, tax payments and salary credits. All of these move through the same account, filling folios at a pace that a savings account simply does not match.
Savings account holders are largely exempt, though a small number of banks apply the charge if transactions cross a certain volume within a quarter. If you are unsure whether your account type attracts folio charges, check your bank's published schedule of charges.
How are ledger folio charges calculated?
Volume drives the calculation. A folio accommodates a set number of debit and credit pairs, often between 30 and 50, depending on the bank. Once that limit is crossed, the next folio begins and adds to the charge for that period.
The arithmetic is straightforward. Take the number of folios your account consumed in a quarter and multiply it by the per-folio rate published in your bank's schedule of charges. That gives you the total charge for the period.
The formula is:
Total ledger folio charge = Number of folios used x Per-folio rate
To put this in context, assume a bank allows 50 entry pairs per folio and charges ₹25 per folio. A business has recorded 200 transactions in a quarter, which consumes four folios.
Their total charge for that quarter = ₹25 x 4 = ₹100
Businesses that experience heavy transaction cycles in certain months will naturally use more folios during those quarters. Checking the bank's schedule at the start of each financial year (FY) removes the element of surprise when the charges are deducted.
How to record ledger folio charges in your books
Folio charges belong under bank charges or bank service charges in your account books. Parking them under miscellaneous expenses or leaving them unrecorded is where the trouble starts. Small as they are, missing these entries causes a mismatch during bank reconciliation that you will eventually have to trace back and fix.
Here is how to handle them correctly.
- Pull up your bank statement and look for the entry. It will appear as ‘LF Charges’ or ‘Ledger Folio Charges’ followed by the billing period.
- Check whether a bank charges ledger already exists in your accounts before passing any entry.
- Debit the bank charges account and credit the bank account for the exact amount deducted.
- The Goods and Services Tax (GST) component needs its own separate entry. Use the figure given in the bank's charge advice.
- Record these charges quarterly instead of waiting until year-end.
GST on ledger folio charges
Ledger folio charges fall under financial and related services. They are levied a GST of 18% in India. On your bank statement, the tax portion appears as a separate line item on the same date as the folio charge deduction.
Businesses can claim input tax credit on this amount under Section 16 of the Central Goods and Services Tax (CGST) Act, 2017, but only if the bank has issued a valid tax invoice against the charge. Eligibility is determined by how directly the charge relates to a taxable supply, which can differ from one business to another.
Common errors to avoid
A few mistakes often surface but are easy to prevent once identified.
- Treating the charge as too small to matter: Over a full year, missed folio entries can build into reconciliation gaps that become difficult and time-consuming to trace.
- Wrong ledger classification: These charges sometimes end up under printing and stationery or office expenses, which are incorrect. This reduces the accuracy of financial statements.
- Overlooking the GST component: Recording the total deduction as a single entry without separating the tax portion either inflates the expense figure or leaves the GST amount unaccounted for. Both of these cause complications when filing returns.
Conclusion
Ledger folio charges may appear minor, but leaving them unrecorded can create reconciliation gaps over time. Correct classification, timely recording and separating the GST component are habits that take very little effort to build but save considerable effort later.
TallyPrime makes this easier in practice. It provides accurate ledger management, bank charge recording and reconciliation built into a single workflow, helping businesses stay on top of folio charges.
