Overdraft in Bank Reconciliation Statement
Arjun EP
What is bank overdraft and how to adjust in BRS?
According to cash book, bank balances are shown by cash book may be debit or credit balance.
Debit bank balance means there is some cash in the customer’s account in the bank.
But credit balance means, the customer has drawn more than his deposited.
Excess withdrawn is known overdraft.
For overdraft facility, customer must deposit security.
The need for security or the type of security depends on the bank’s policies.
Limit of overdraft is pre-fixed according to security.
Bank charges high interest rate on overdraft.
In the past, the goodwill of a customer was enough security for receiving an overdraft facility.
But present day bankers do not risk their funds as easily.
Overdrafts are allowed when security or guarantee has been provided for.
In technical words, guarantee is known as collateral.
Keep in Mind (KIM)
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In bank reconciliation statement, there are two types of overdraft: Overdraft as per cash book or credit balance as per cash book. Overdraft as per pass book or debit balance as per pass book. |
Overdraft as per cash book or Credit balance as per cash book
If there is overdraft as per cash book, do not worry,
Just write overdraft amount in bracket or minus.
Rest of other rules are as same as balance as per cash book
Example:
Overdraft as per cash book Rs 25,000
Bank Reconciliation Statement
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Particulars |
Amount |
Amount |
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Overdraft as per cash book |
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(25,000) |
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Add: |
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Less: |
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Keep in Mind (KIM)
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According to cash book: All income and increase in cash are added All expenses and reduction in cash are deducted
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Interest on investment is income Interest on loan or debentures is expenses
Debited in cash book means cash increase Credited in cash book means cash decrease |
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Debit balance of cash book = Balance as per cash book Credit balance of cash book = Overdraft as per cash book |
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Overdraft as per pass book or Debit balance as per cash book
If there is overdraft as per pass book, do not worry,
Just write overdraft amount in bracket or minus.
Rest of other rules are as same as balance as per pass book
Example:
Overdraft as per pass book Rs 56,000.
Bank Reconciliation Statement
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Particulars |
Amount |
Amount |
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Overdraft as per cash book |
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(56,000) |
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Add: |
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Less: |
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