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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Interest is charged only on amount withdrawn and not whole 50 lacs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



For CA profession,there are more Debtors and no stock

hence they take OD Limit



Hence, it is given in case of those business where stock is more than debtors


For example

For Manufacturing Business,a lot of stock is required to be kept

Hence,they take CC Limit



Note:-Accounting Entries are same for OD and CC


Assignment for Overdraft Entries

Company took Overdraft/Cash Credit Limit of Rs 6,00,000 from ICICI Bank.

Transactions from OD/CC Account

  • It spent Rs 200000 for paying Max & Co a Sundry Creditor out of this Overdraft Acccount
  • Rs 15000 was received in this account from AK Traders, a Sundry Debtor
  • RS 30000 Salary was paid out of this account
  • Amount transferred Rs 100000 from OD A/C to ICICI Current A.c
  • Amount received from SBI Account of Company 40000   
  • Cash Deposited Rs 5000 in OD A/c
  • Cash Deposited by unknown customer Rs 20000 in OD A./c
  • Interest Charged y Bank Rs 2000 on this FD account

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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.