Overdraft Interest

Fletcher
Fletcher Registered Posts: 1 New contributor 🐸
in AAT student discussion
How do you account for overdraft interest?

Comments

  • Bookworm55
    Bookworm55 Registered Posts: 478 Dedicated contributor 🦉
    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.
  • OlympicRudi
    OlympicRudi Registered Posts: 53 Regular contributor ⭐
    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.
  • burg
    burg Registered, Moderator Posts: 1,425 mod
    OlympicRudi wrote: »
    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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