Credit Balance for Bank on
Balance Sheet

by Heather
(Queensland, Australia)

Q: Where is 'Bank' entered on a balance sheet if it is has a credit balance (overdrawn)? Is it still an 'asset' with a credit amount posted or is it listed with the 'liabilities'?


Overdraft

A:
It is listed under current liabilities and is called Bank overdraft .

The reason it falls under liabilities is that the business now owes the bank some money. It is now basically lending from and owing the bank. So it is a debt or liability.

It is placed under current liabilities because it is generally assumed that the business will handle this debt within a period of one year.

FYI I have lessons on cash, bank and bank reconciliations in the basic accounting book I wrote.

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