If drawing on an operating line of credit results in a negative cash balance, a current liability known as bank indebtedness results.

Question

Quizplus · Accepted Answer

Drawing on an operating line of credit beyond the available cash balance creates a liability for the company, as it owes the bank money, thus resulting in bank indebtedness, which is classified as a current liability because it is typically due within one year.

If Drawing on an Operating Line of Credit Results in a Negative