Question

Write the journal entry for the following-
Bank overdraft Rs 18500​

Answer 1

Answer:

Explanation:

Before journal entry is prepared, one should understand the complete system of overdraft allowed by Bank.

Suppose you have a bank balance of Rs.50000.00.  In routine you issued a cheque of Rs.60000.00 considering that cheque sent by you in the Bank might have been cleared and this cheque of Rs. 60000.00 will be honoured by the Bank in the normal routine. Meanwhile the cheque issued by you has been presented by the client for payment.

I mean to say, if some one issues a cheque and the balance is insufficient, then Bank, taking into consideration of the reputation/past dealing of the customer/may or may not be with the concurrence of the account holder) passes the cheque and allowed overdrawn.  This is Bank overdraft.

In such cases, no entry will be made but this will reflect while you will prepare the Bank reconciliation statement for tallying the Bank balance and the balance of Bank account in your books of account)

But in case you have made the payment to your customer and asked you Banker to overdraft my account and Bank agreed, In that case following simple  entry will be made

Customer's A/c Dr

 To Bank A/c