Overdraft Interest

FletcherFletcher Just JoinedPosts: 1Registered
How do you account for overdraft interest?

Comments

  • Bookworm55Bookworm55 Trusted Regular Posts: 479Registered
    Not 100% on this, but surely it's just like loan interest?

    Because that's all an overdraft is, effectively. A type of extremely short term and/or unauthorised loan.
  • OlympicRudiOlympicRudi Feels At Home Posts: 55Registered
    Fletcher wrote: »
    How do you account for overdraft interest?

    I think that would be

    Dr Relevant expense account(Eg. Overdraft interest/bank charges etc.)

    Cr Bank

    Basically all you're doing is increasing the overdraft by the interest & charging it as an expense in the P&L.
  • burgburg Experienced Mentor GloucesterPosts: 1,440Moderator, FMAAT, AAT Licensed Accountant
    I think that would be

    Dr Relevant expense account(Eg. Overdraft interest/bank charges etc.)

    Cr Bank

    Basically all you're doing is increasing the overdraft by the interest & charging it as an expense in the P&L.

    This is correct.

    The expense heading can be anything of relevant description.
    Usual ones tend to be

    Bank interest
    Bank charges and interest
    Regards,

    Burg
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