Where is interest on bank overdraft debited.

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Solution

Interest on bank overdraft is debited in the bank passbook and is charged by the bank.

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Prepare bank reconciliation statement.

(i)	Overdraft shown as per cash book on December 31, 2017 Rs 10,000.
(ii)	Bank charges for the above period also debited in the passbook Rs 100.
(iii)	Interest on overdraft for six months ending December 31, 2017 Rs 380 debited in the passbook.
(iv)	Cheques issued but not incashed prior to December 31, 2017 amounted to Rs 2,150.
(v)	Interest on Investment collected by the bank and credited in the passbook Rs 600.
(vi)	Cheques paid into bank but not cleared before December, 31 2017 were Rs 1,100.

Q. On checking the Bank Pass Book it was found that it showed an overdraft of ₹ 5,220 as on 31.12.2014, while as per Ledger it was different to Bank Debit. The following differences were noted:
(i) Cheques deposited but not yet credited by bank ₹ 6,000.
(ii) Cheques dishonoured and debited by bank but not given effect to it in the Ledger ₹ 800.
(iii) Bank charges debited by bank but Debit Memo not received from bank ₹ 50.
(iv) Interest on overdraft excess credited in the Ledger ₹ 200.
(v) Wrongly credited by bank to account, deposit of some other party ₹ 900.
(vi) Cheques issued but not presented for payment ₹ 400.

On December 31, 2017, 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 passbook.

(1)	Debited by bank for Rs 200 on account of Interest on overdraft and Rs 50 on account of charges for collecting bills.
(2)	Cheques drawn but not encashed before December, 31 2017 for Rs 4,000.
(3)	The bank has collected interest and has credited Rs 600 in passbook.
(4)	A bill receivable for Rs 700 previously discounted with the bank had been dishonoured and debited in the passbook.
(5)	Cheques paid into bank but not collected and credited before December 31, 2017 amounted Rs 6,000.

Q. On checking the Bank Pass Book it was found that it showed an overdraft of ₹ 5,220 as on 31st March, 2018, while as per Ledger it was different. The following differences were noted:
(i) Cheques deposited but not yet credited by the bank ₹ 6,000.
(ii) Cheques dishonoured and debited by the bank but not given effect to it in the Ledger ₹ 800.
(iii) Bank charges debited by the bank but Debit Memo not received from the bank ₹ 50.
(iv) Interest on overdraft excess credited in the Ledger ₹ 200.
(v) Wrongly credited by the bank to account, deposit of some other party ₹ 900.
(vi) Cheques issued but not presented for payment ₹ 400.

Q. Treatment of interest on bank overdraft in cash flow statement

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