How is an overdrawn bank balance treated in a reconciliation?

Beginner

Answer

An overdraft is a credit balance in the cash book and a debit (overdrawn) balance on the bank statement. The reconciliation logic reverses: from an overdrawn statement balance, deduct outstanding lodgements and add unpresented cheques to reach the adjusted cash book overdraft. Care with signs is essential.

Real-world example For an overdrawn account, unpresented cheques increase the overdraft in the cash book relative to the statement.

Common follow-ups: Is an overdraft a debit or credit in the cash book? | How does the sign logic change?

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