Home » Accounting Explanation » Books of original entries - Cash Book


Bank overdraft

A Business can borrow money from bank with the help of bank overdraft. It implies that the business can withdraw money from its bank account more than it has deposited in the account.

In other words, banks give you a chance to withdraw more money than you have in your account. For example if a business has $5000 in its bank account, it can withdraw more than $5000. The excessive amount would be the bank overdraft (a current liability) of business and thereby business will have to pay off that liability.

In the case of overdraft Balance c/d is always on the debit or receipt(s) side of a cash book indicating that we have withdrawn more than we have deposited in our bank account

                                                                       Cash Book
Dr. (Debit)                                                                                                                                        Cr. (Credit)
Date
Description
Folio
Discount
Cash
Bank
Date
Description
Folio
Discount
Cash
Bank
Jan.1
      3
    27
      
Balance b/d
Debtor
M. berry




Balance c/d




200


5000
3000






5000

1000




3000


Jan.6
      8
      9
    17
      
Sundry exp.
Drawings
Creditor
Equipments



Balance c/d















200
2000

2000




4000
1000
3000
2000
3000
    31TOTAL

80009000    31TOTAL

80009000


$3000 is the overdraft (liability) of the business will be shown in balance sheet in the category of current liabilities