In The Financial Statements The Bank Overdrafts Will Be Classified As What?
In the Financial Statements , the bank overdrafts will be classified as Current Liabilities as the depositor withdrew more money than the balance he has on bank account. Any exceeding amount is a current liability for him to pay to the bank. For example, if the account holder has $5000 in the current account / checking account but he withdrew $6000, then $1000 is the current liability which is the exceeding amount i.e., Exceeding Amount = $6000 - $5000 = $1000. Actually, the bank provides the bank overdraft facility upto a limit to the account holder in case he needs more money than the amount deposited into his account. When the depositor deposited money into his account then this exceeding amount will be deducted from the deposited amount. For example, if the depositor deposited $5000 into the checking account, then the bank will deduct $1000 as a bank overdraft from the deposited money and remaining ($5000 - $1000) $4000 will be credited to depositor’s account. From the poin...