What is the accounting entry for limit utilization by bank?

This query is : Resolved

Rajkk (Querist)
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28 April 2016 My bank has debited my account on 31st march for full amount of my cc limit. So on 31st march my account shows debit by the amount of my cc limit. And the bank refunded the same amount on 1st april. Now what accounting treatment should be done for that debit and credit in my books of accounts.

Rupesh Jain

Rupesh Jain (Expert)
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28 April 2016 you have to done entry as done by bank and your bal. come debit in your books then you have to show as bal. with bank

Rajkk

Rajkk (Querist)
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28 April 2016 Its ok but in what accounts should the money withdrawn by bank be debited and where will it show on my balance sheet?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Hey! Here’s how you should handle the accounting entries for **limit utilization by the bank on your Cash Credit (CC) account**, especially when the bank debits and then refunds the same amount:

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### Scenario Recap:

* On 31st March, bank debits your account for the full CC limit (meaning your account shows a debit balance equal to CC limit).
* On 1st April, bank refunds that amount back (credits your account).

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### How to record this in your books?

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#### 1. When the bank **debited** your account (utilized the CC limit):

* Bank has effectively **withdrawn the CC limit amount** from you, so your cash/bank balance reduces.
* Entry:

```
No entry needed in your books for debit by bank, as this is bank's internal adjustment.
```

But practically, if you want to record this as per books:

```
Dr. Cash Credit Loan Account (Liability) XXX
To Bank Account XXX
```

* This shows that the bank has **utilized the CC limit**, increasing your loan liability and reducing your bank balance.

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#### 2. When the bank **refunded** the amount on 1st April:

* This reverses the earlier transaction.

```
Dr. Bank Account XXX
To Cash Credit Loan Account XXX
```

* Your bank balance increases, and the CC loan liability decreases.

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### How it appears in the Balance Sheet?

* **Cash Credit Loan Account:** Shows as a **current liability** under loans from banks.
* **Bank Account:** Shows cash/bank balance in current assets.

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### Summary:

| Date | Particulars | Debit (₹) | Credit (₹) |
| ------ | ----------------------- | --------- | ---------- |
| 31 Mar | Cash Credit Loan A/c | XXX | |
| | To Bank A/c | | XXX |
| 01 Apr | Bank A/c | XXX | |
| | To Cash Credit Loan A/c | | XXX |

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### Important:

* This is mostly a **bank internal adjustment**.
* Confirm with your bank and your accountant whether you need to reflect it in your books or just reconcile in bank statements.
* Such entries generally appear only when there’s an actual movement of cash or loan.

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If you want, I can help you prepare journal vouchers or ledger entries for this. Just ask!

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