Question

what is the reason for recording bill discounted dishonoured in minus column of bank reconciliation statement when overdraft as per cash book is given

Answer 1

Suppose, Mr. A has a deposit of Rs 500 but he draws Rs 800. Then, his Pass Book shows debit balance of Rs 300 and such a balance (Rs 300) is technically known as Overdraft. Overdraft means overdrawing of a bank account. It is the nature of a loan granted by the bank.

When there is overdraft the situation will just opposite to that when there is a favourable balance. Hence, reverse steps would, of course, be taken while preparing Bank Reconciliation Statement. When there is an overdraft, the bank Pass Book shows a debit balance and the Bank Account in the Cash Book shows a credit balance. The reasons for the discrepancies mentioned earlier are the same, under overdraft, but in opposite direction.

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