There is no repayement of OD/CC
Only interest amount to be repaid


Overdraft/Cash Credit is a kind of Negative Bank Account.

Suppose Bank sanction such limit for OD/CC of 50 lacs,it means a person can have negative balance of maximum 50 lacs in bank account  Interest is charged only on amount withdrawn and not whole 50 lacs

 

Difference between OD AND CC

Overdraft (OD) Cash Credit (CC)
It is normally given on security of Debtors or property It is given on security of stock
hence, it is given in case of those business where debtors are more than stock Hence, it is given in case of those business where stock is more than debtors
For CA profession,there are more Debtors and no stock For Manufacturing Business,a lot of stock is required to be kept
hence they take OD Limit Hence,they take CC Limit

Example 1(a):- 

Suppose  a person applies for OD/CC limit of 10 lacs on 18 June 2016 Bank Charges 2% processing charges and sanction him OD/CC limit on 10 July 2016 @ Base Rate +3 % What is the interest to be booked for 2016-17 and 2017-18 if Base Rate of Bank is 8.5%

View Answer

Example 1(b):-

Suppose limit enhanced on 18 Aug 2018 t0 15 lacs

-a-

Interest Chart for Overdraft/Cash Credit (OD/CC) - Loan Chart


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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.