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The following bank reconciliation has been prepared by a trainee accountant.
Overdraft per bank balance 3860
Less: Unpresented cheques 9160
…………………………………………………….
5300
Add: Outstanding Lodgements 16690
……………………………………………………..
Cash at bank 21990What should be the correct balance per the cash book?
answer:
bank balance (3860)
less: Unpresented cheques (9160)
Add: Outstanding Lodgements 16690
………………………………………………………
Balance per cash book 3670 (overdrawn)HOW DO YOU KNOW WHEN THE BALANCE IS OVERDRAWN?
ON WHAT SIDE OF THE TRIAL BALANCE DOES AN OVERDRAWN BANK BALANCE APPEAR?
You know it is overdrawn because the balance on the bank statement is an overdraft, and after prepared the bank reconciliation the balance is still overdrawn.
An overdraft is a credit balance in the cash account (and therefore on the trial balance also).
A site on the internet says as per overdraft the c/d amount is debited on the receipts side of the cash book..
You obviously did not understand the other website!!
An overdraft is always a credit balance in the cash account.
(Assets are debit balances and liabilities are credit balances – an overdraft is a liability!)Obviously balances are always carried down from the opposite side!
You should watch the free lectures on double entry – that would help you!
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