• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Another question...overdrafts

1

12345

Member
Hello there,

Hope someone can help with this one - what to do with an overdraft in terms of current assets?

In Q&A bank part 3:

Q 3.23 has a balance sheet with a cash figure in the current assets that includes the overdraft liability

Q 3.24 we work out a balance sheet with no cash figure in the current assets but an overdraft liability. Should there not be a current asset cash item to the tune of this overdraft?

I can get it to balance but this train of thought has thrown me, any help would be much appreciated.
 
The balance sheet shows what the company owns (assets) and owes (liabilities) at a point in time. So, in Q3.23, on 31/12/06, KKK held a current asset of £34,500 in cash. It also had a current liability of £10,000 as an overdraft. This means that the bank has allowed the company to take out in cash more than it has got in its account. (If you had an overdraft agreement of £100 with your bank, you could draw out £100 in cash and owe the bank £100.) In Q3.24, the company has probably used its overdraft to pay for its raw materials etc so it has no cash.

Hope this helps.
 
You must log in or register to reply here.
Back
Top