What is bank over draft explain
Answers
Answer:
Overdrafts are where the bank account becomes negative and the business in effect has borrowed from the bank. This is shown in the cash book as a credit balance. In other words,when a firm withdraws more than its deposits from the bank, the situation will become bank overdraft and will be treated as liability of the business.
Explanation:
PERSONAL FINANCE BANKING
Overdraft
By JULIA KAGAN Reviewed by SOMER ANDERSON Updated Apr 6, 2021
What Is an Overdraft?
An overdraft is an extension of credit from a lending institution that is granted when an account reaches zero. The overdraft allows the account holder to continue withdrawing money even when the account has no funds in it or has insufficient funds to cover the amount of the withdrawal.
Basically, an overdraft means that the bank allows customers to borrow a set amount of money. There is interest on the loan, and there is typically a fee per overdraft. At many banks, an overdraft fee can run upwards of $35.