• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

June 2025 ACCA Exams

How was your exam? Comments & Instant poll >>

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for June 2025 exams.
Get your discount code >>

What does it mean to guarantee an overdraft?

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › What does it mean to guarantee an overdraft?

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 29, 2015 at 7:19 am #239369
    Tyra
    Member
    • Topics: 7
    • Replies: 9
    • ☆

    ‘A company has guaranteed the overdraft of another company. The likelihood of a liability arising under the guarantee is assessed as possible.’ What does this mean?

    Thanks!

    March 29, 2015 at 8:23 am #239383
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54674
    • ☆☆☆☆☆

    If you have an overdraft (i.e. you borrow money from the bank) then obviously there is a risk to the bank that you might not repay.

    If I guarantee the overdraft, then it means that I promise to the bank that if you do not pay then I will pay instead. (There is less risk to the bank and therefore they might be more likely to lend you the money).

    Because I have guaranteed the overdraft it therefore means that there is a chance that I might have to pay the money. Therefore a contingent liability. From the free lecture on IAS 37, you will know what the accounting standard says that I should do if it is classed as “possible”.

    March 29, 2015 at 9:45 am #239387
    Tyra
    Member
    • Topics: 7
    • Replies: 9
    • ☆

    But then what are the benefits to the company who has guaranteed the overdraft of another company? What is this type of service called?

    March 29, 2015 at 10:45 am #239391
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54674
    • ☆☆☆☆☆

    There are no specific benefits. Maybe they have a good trading relationship.

    It is called ‘guaranteeing an overdraft’ – it is no special service.

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • shalomACCA on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • kamo7293 on Group SFP – FV adjustments – ACCA Financial Reporting (FR)
  • kamo7293 on Group SFP – NCA PUPs – ACCA Financial Reporting (FR)
  • fathi on ACCA Flashcards
  • kamo7293 on Group SFP – Example (PUPs) – ACCA Financial Reporting (FR)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in