answersLogoWhite

0

What is a bank overdraft?

Updated: 9/13/2023
User Avatar

Wiki User

11y ago

Best Answer

A bank overdraft is when someone is able to spend more than what is actually in their bank account. Obviously the money doesn't belong to them but belongs to the bank so this money will need to be paid back; normally automatically done when money goes into the persons account. The overdraft will be limited.

A bank overdraft is also a type of loan as the money is technically borrowed.

User Avatar

Wiki User

11y ago
This answer is:
User Avatar

Add your answer:

Earn +20 pts
Q: What is a bank overdraft?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Related questions

What is journal entry of bank overdraft?

Debit cash / bankCredit loan from bank / bank overdraft


What is the journal entry for bank overdraft taken from any bank?

Debit cash / bankCredit bank overdraft


Is bank overdraft an asset?

yes it is an asset overdraft


Where is an opening bank overdraft shown?

Would you classify a Bank Overdraft as Cash? If Yes, why?


When filing for a bank overdraft what do the bank check for?

Your income & your ability to repay the money provided as overdraft


What is the journal entry for overdraft?

For an overdraft, the journal entry would be to debit the bank account (increasing the overdraft liability) and credit the corresponding expense account or accounts that led to the overdraft. This reflects the additional amount drawn from the bank account beyond the available balance.


Where do you put loan interest and bank overdraft in final accounts junior cert?

interest on bank overdraft.


Do you have to pay interest on a bank overdraft?

do you have to pay interest on a band overdraft ?


Difference between bank loan and bank overdraft?

These two terms are different.For a bank overdraft, you should have an account with the bank and it is a limit on borrowing on a bank current account. With an overdraft the amount of borrowing may vary on a daily basis.A bank loan is a fixed amount for a fixed term with regular fixed repayments. The interest on a loan tends to be lower than an overdraft.


What is the reason for overdraft charges from a bank?

Bank overdraft charges are the result of someone spending more money than they have in their bank account. The bank then charges interest on the overdrawn amount.


Is an overdraft an advance?

Yes. Overdraft is like an advance where you take cash from your overdraft account (even though you do not have equivalent bank balance) and then you repay the money to the bank once you have raised enough funding to repay the same. The bank would charge you an overdraft fee + interest for the money you borrowed from them


Is a bank overdraft an liability?

Bank Overdraft as Liability by Kayors Yes, a bank overdraft are classified as a current liability. What happens here is withdrawls from the bank exceed deposits. The lending institution, usually the bank, would allow an extension of credit in such a case. The company is usually expected to pay within short-term and it results in negative balance in company's bank account. That is the reason for the overdraft being classified as a current liability.