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Question
What is a bank overdraft?
Solution
Bank overdraft is a liability to an account holder.
When the account holder withdraws excess amount over his/her available bank balance, he/she runs a negative bank balance.
The negative bank balance is an obligation to the account holder and is called bank overdraft.
In other words, bank overdraft is the excess of withdrawal over deposits.
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RELATED QUESTIONS
State the need for the preparation of bank reconciliation statement?
From the following particulars, prepare a bank reconciliation statement as at March 31, 2017.
- Balance as per cash book ₹ 3,200
- Cheque issued but not presented for payment ₹ 1,800
- Cheque deposited but not collected upto March 31, 2014 ₹ 2,000
- Bank charges debited by bank ₹ 150
From the following particulars, prepare a bank reconciliation statement as at March 31, 2017.
- Balance as per cash book ₹ 3,200
- Cheque issued but not presented for payment ₹ 1,800
- Cheque deposited but not collected upto March 31, 2014 ₹ 2,000
- Bank charges debited by bank ₹ 150
Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2017.
| (₹) | |
| Opening Stock | 50,000 |
| Net sales | 11,00,000 |
| Net purchases | 6,00,000 |
| Direct expenses | 60,000 |
| Administration expenses | 45,000 |
|
Selling and distribution expenses
|
65,000 |
| Loss due to fire | 20,000 |
| Closing stock | 70,000 |
Rectify the following errors:
- Sales book overcast by ₹ 700.
- Purchases book overcast by ₹ 500.
- Sales return book overcast by ₹ 300.
- Purchase return book overcast by ₹ 200.
