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An overdraft or cash credit account has a negative balance and the usual BRS add and deduct rules give the wrong answer.
Treat the balance as an amount owed; ask whether each item makes the overdraft per passbook larger or smaller, and add or deduct accordingly.
Starting from overdraft per cash book: deduct cheques issued not presented, add deposits not credited, add interest and charges debited by the bank, deduct direct credits.
A BRS that reaches the passbook overdraft exactly, with OD interest posted to the books.
An overdraft (OD) or cash credit (CC) account is reconciled like any other bank account. The difference is that the balance is money you owe the bank, so the add and deduct signs on timing items flip compared with a positive balance. Once you think of the balance as a debt, the rest follows.
Why does the cash book show a credit balance for an OD or CC account?
When a normal bank account has money in it, that money is your asset, so your cash book (or the bank ledger in Tally or Zoho Books) shows a debit balance. When you draw more than you have, using a limit the bank has given you, you owe the bank. That is a liability, so the ledger shows a credit balance.
| Point | Positive-balance current account | OD or CC account in use |
|---|---|---|
| What the balance means | Money the bank holds for you | Money you owe the bank |
| Cash book or ledger balance | Debit | Credit |
| Passbook balance marked | Cr | Dr (or a minus sign) |
| Balance sheet heading | Cash and bank balances | Borrowings (short-term, repayable on demand) |
| Typical Tally group | Bank Accounts | Bank OD A/c |
| A deposit does what | Increases your balance | Reduces what you owe |
| A payment does what | Reduces your balance | Increases what you owe |
How do the signs change?
Ask one question for each item: does it make the overdraft per passbook larger or smaller than the overdraft per cash book?
- Cheque issued, not yet presented. You recorded the payment, so your overdraft went up. The bank has not paid it, so its overdraft is smaller. Deduct.
- Deposit not yet credited. You recorded the receipt, so your overdraft went down. The bank has not credited it, so its overdraft is larger. Add.
- Interest or charges debited by the bank, not in books. The bank’s overdraft is larger. Add.
- Direct credit by a customer, not in books. The bank’s overdraft is smaller. Deduct.
Worked example
On 31 March a small engineering firm’s cash credit account shows an overdraft of ₹3,20,000 per the cash book. The passbook shows ₹3,09,800 Dr. Ticking finds three items:
- Cheques issued to suppliers, not yet presented: ₹40,000
- Cheques deposited on 31 March, not yet credited: ₹25,000
- Interest on the CC account debited by the bank, not yet booked: ₹4,800
| BRS as at 31 March (OD/CC account) | ₹ |
|---|---|
| Overdraft as per cash book | 3,20,000 |
| Less: cheques issued, not yet presented | (40,000) |
| Add: cheques deposited, not yet credited | 25,000 |
| Add: interest debited by bank, not in books | 4,800 |
| Overdraft as per passbook | 3,09,800 |
Check: ₹3,20,000 − ₹40,000 = ₹2,80,000; + ₹25,000 = ₹3,05,000; + ₹4,800 = ₹3,09,800. It agrees with the passbook.
Compare this with a positive-balance account, where cheques not presented are added and deposits not credited are deducted. Every timing sign has flipped.
How does overdraft interest show up in a BRS?
Banks debit interest on OD and CC accounts to the same account, so it raises the overdraft. Because the debit arrives with the statement, it is often missing from the books at month-end. Once you find it in the BRS, pass the entry:
Dr Interest on cash credit ₹4,800 Cr Bank CC account ₹4,800
After this entry, the overdraft per cash book becomes ₹3,24,800. The adjusted passbook overdraft is ₹3,09,800 + ₹40,000 − ₹25,000 = ₹3,24,800. Both agree, and only the two timing items carry into April’s BRS.
Processing fees, renewal charges and stock-audit charges on CC accounts are debited the same way and are treated the same, usually with GST on the fee.
What to read next
- Next in this series: Bank charges reconciliation in India
- Go deeper: Multi-bank reconciliation in India
- Background: Bank reconciliation statement: when do you add and when do you deduct?
- For teams: Bank reconciliation software for India
TransactIG matches bank statement lines to the books for current, OD and CC accounts alike, with unmatched lines in an exception queue and audit-ready exports.