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Interest is charged only on amount withdrawn and not whole 50 lacs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 |
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hence, it is given in case of those business where debtors are more than stock
Example For CA profession,there are more Debtors and no stock hence they take OD Limit
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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
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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
Pass Entries
View answer
Company took Overdraft/Cash Credit Limit of Rs 6,00,000 from ICICI Bank.
No Entry for taking Bank OD CC limit as no amount as been received (only amount sanctioned)
All other entries we wil pass as it is a bank a/c like
It spent Rs 200000 for paying Max & Co a Sundry Creditor out of this Overdraft Acccount
Max and Co 200000
To ICICI Bank OD 200000
Rs 15000 was received in this account from AK Traders, a Sundry Debtor
ICIC Bank OD Dr 15000
To Ak Traders A/C 15000
RS 30000 Salary was paid out of this account
Salary Exp 30000
To ICICI Bank OD 30000
Amount transferred Rs 100000 from OD A/C to ICICI Current A.c
ICICI Bank Dr 100000
To ICICI Bank OD 100000
Amount received from SBI Account of Company 40000
ICICI Bank OD Dr 40000
To SBI Bank OD 40000
Cash Deposited Rs 5000 in OD A/c
ICICI Bank OD Dr 5000
To SBI Bank OD 5000
Cash Deposited by unknown customer Rs 20000 in OD A./c
ICICI Bank OD Dr 20000
To Suspense A/c 20000
Interest Charged by Bank Rs 2000 on this FD account
Interest Exp Dr 2000
To ICICI Bank OD 2000