Journal entry for bank overdraft

With the help of an overdraft, an individual can continue to withdraw the money without even funds in the account.

• When payment is made to bank overdraft:

Bank overdraft A/c Dr

To cash (being money deposited )

• When Money is withdrawal from the bank:

Note: bank Overdraft is a liability for the firm.

Cash A/c Dr

To Bank Overdraft A/c

• When payment is made to the creditor

The bank overall is the facilities that are given to the special customers that have an account in a respective bank that gets an extension of the credits from the bank and then the account reached zero.

creditor A/c Dr

To bank overdraft A/c

(being payment is made to the creditor)

• When goods are purchased from a Bank Account:

Purchased A/c Dr

To Bank overdraft A/c

Well explained.. Great.

Sir In our firm maintaining OD Bank Account and paying loan to a x person how should I treat that entry in payment voucher

Sir,

        kindly help me to post the entry for  the bank overdraft account opening entry. I mean how to fix the overdraft limit given by the bankers

To record the bank overdraft account opening entry and establish the overdraft limit, follow these steps:

1. Debit the Bank Overdraft account: Increase the Bank Overdraft account by the amount of the approved overdraft limit. This will represent the borrowing capacity.

2. Credit the Bank account: Decrease the Bank account by the same amount as the approved overdraft limit. This signifies that the funds are available for withdrawal beyond the account balance.

The journal entry will be:

Bank Overdraft Account......Dr.
Bank Account......Cr.