treatment of interest on bank overdraft in cash flow statement ?
for example- if previous year balance sheet shows 10000 interest on bank overdraft and current year shows 15000 as interest on bank overdraft ,then what to do?

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Solution

Dear Student,

Interest on Bank Overdraft is added directly to the balance of our Overdraft Account by the Bank . Also, Bank overdraft is considered as part of our Cash & Cash Equivalents while preparing Cash Flow statement.

Therefore, Rs. 10,000 in the question the balance of previous year would be added to the sum of all the three activities (Operating ,Investing & Financing) along with the opening balance of other Cash & Cash Equivalents so that their total match up with the closing balance of Cash & Cash Equivalents which would include Rs 15,000 of Bank Overdraft.

Regards,

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Similar questions

Q. Where is interest on bank overdraft debited?

Q. Interest on bank overdraft is recorded on ___________ side of pass-book.

In which column (Plus or Minus) you will write the following while preparing bank reconciliation statement from the credit balance of cash book.

(i) Cheques paid into the bank but not collected.

(ii) Interest on bank overdraft.

Q. On December 31, 2010, the cash book of Mittal Bros showed on overdraft of Rs.6,920. From the following particulars prepare a Bank Reconciliation Statement and ascertion the balance as per pass book.
i) Debited by bank for Rs. 200 on account of Interest on overdraft and Rs.50 on account of charges for collecting bills.
ii) Cheques drawn but not encashed before December 31, 2010 for Rs.4,000.
iii) The bank has collected interest and credited Rs. 600 in pass book.
iv) A bill receivable for Rs.700 previously discounted with the bank had been dishonoured and debited in the pass book.
v) Cheques paid into bank but not collected and credited before December 31, 2010 amounted Rs.6,000.

On 31st December, 2016, the cash book of Mittal Bros showed an overdraft of Rs. 6,920. From the following particulars, prepare a bank reconciliation statement and ascertain the balance as per pass book.

(i) Debited by bank Rs. 200 on account of interest on overdraft and Rs. 50 on account of charges for collecting bills.

(ii) cheque drawn but not encashed before 31st December 2016 for Rs. 4,000.

(iii) The bank has collected interest and has credited Rs. 600 in passbook.

(iv) A bill receivable for Rs. 700 previously discounted with the bank, had been dishonoured and debited in the passbook.

(v) Cheque paid into bank but not collected and credited before 31st December 2016 amounted to Rs. 6,000.

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treatment of interest on bank overdraft in cash flow statement ? for example- if previous year balance sheet shows 10000 interest on bank overdraft and current year shows 15000 as interest on bank overdraft ,then what to do?

treatment of interest on bank overdraft in cash flow statement ?
for example- if previous year balance sheet shows 10000 interest on bank overdraft and current year shows 15000 as interest on bank overdraft ,then what to do?