Question

Balance of cash in hand Rs 15600;Overdraft at Bank Rs 7400

Answer 1

Answer:

Rs.15600 cash balance will be shown on the receipt side of the cash book as opening balance.

Rs.7400 overdraft will be shown on the payment side of the cash book in the bank column as opening balance.

Explanation:

It is a credit facility granted by banks to it's valued customers in which the customer can withdrawn from his account upto the sanctioned limit even if there is nil balance in his account.  The customer also has the freedom to deposit in his account whenever he has money with him.  Due to this arrangement the customer pays interest on the amount actually withdrawn and not on the limit sanctioned.