Description of bank and book overdrafts
Two situations we are going to discuss are bank overdrafts
and book overdrafts.
Bank overdraft takes place when a company doesn’t
have sufficient funds in a bank account to cover presented checks, but the bank
honors them anyway. This creates a short-term liability because the company will
have to settle the obligation with the bank eventually.
Book overdraft is a situation when a company issues
checks in excess of what the bank balance is, but those checks have not been
presented for clearance to the bank yet. Thus, this is an overdraft on the
company’s books.
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Bank overdraft takes place when a company doesn’t have sufficient funds in a bank account to cover presented checks, but the bank honors them anyway. commercialisti milano
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