Question

State whether the following statement is true or false with reasons:

Bank overdraft is an asset of the business.

Options

• True

• False

Answer 1

This statement is False. 

The amount withdrawn by the Current Accountholder in excess of the balance in his Current Account up to a predetermined limit decided by the bank on the basis of security offered is called Bank Overdraft. It is a temporary loan given by the bank to the Current Accountholder. It is a liability of the business.