[GNC] Operating Checking Account in Overdraft

David Cousens davidcousens at bigpond.com
Fri Aug 3 07:23:23 EDT 2018


Murray,

If you operate the account normally with a positive cash balance with only
an occasional excursion into the red for relatively short periods <<
financial year, I would think it is reasonable to record it as an asset
account. 

If however you intend to operate the account as a perrmanent overdraft where
the account is in the red most of the time for some considerable period
comparable with a financial year (e.g. after paying for
renovation/refurbishment), it is operating as a variable principal loan, and
it would be more appropriate to record it as a liability rather than an
asset.

Either approach is reasonable. If the books are for your own business, then
your accountant will be able to sort out any formal reporting requirements.
If there are no formal reporting requirements then that is fine. 

Your main concern is that any fees associated with using the overdraft
facilty and any interest will possibly by tax deductible depending upon tax
rules in your jurisdiction so you will need to record then as expenses.

David Cousens



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David Cousens
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