BANK OVERDRAFT NEGATIVE BALANCE

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When a bank account has a negative balance due to an overdraft, its accounting treatment depends on the nature of the facility. If it's a standard current account overdraft, it's typically shown as a negative figure within cash and cash equivalents. However, if it's a formal loan or overdraft facility, it should be classified as a short-term loan liability on the balance sheet, either secured or unsecured.

Hrusikesh Nanda

Hrusikesh Nanda (Querist)

25 June 2020 An institution has one & only normal bank account. On 31st MARCH the bank allowed an overdrawn amount to overcome some essentials. So now bank balance is negative position.
What will be the treatment in R/P, I/E and BALANCE SHEET. Please clarify.

Eswar Reddy S

Eswar Reddy S (Expert)

25 June 2020 If it is normal current account then show it under cash and cash equivalents negative figure

Eswar Reddy S

Eswar Reddy S (Expert)

25 June 2020 If it is loan/ overdraft account then show it under short term loan liability in BS

c.bakshi

c.bakshi (Expert)

26 June 2020 IF NEGATIVE BALANCE, THEN CAN'T BE SHOWN UNDER CASH AND CASH EQUIVALENT AND MUST BE SHOWN UNDER SHORT TERM LIABILITY UNDER SECURED OR UNSECURED IT DEPENDS UPON TYPES OF OD LIMIT.

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