Bank overdrafts, if material, should be
A) reported as a deduction from the current asset section.
B) reported as a deduction from cash.
C) netted against cash and a net cash amount reported.
D) reported as a current liability.

Question

Quizplus · Accepted Answer

Bank overdrafts should be reported as a current liability because they represent a liability owed to the bank. They should not be netted against cash, as this would present an inaccurate picture of the company's liquidity. Additionally, they should not be deducted from either the current asset section or cash, as they do not represent a reduction in either of these accounts.

Bank Overdrafts, If Material, Should Be