Favourable Balance vs Overdraft
Your bank balance can be positive or negative. Let's understand both.
Favourable Balance (Credit Balance in Pass Book)
Meaning: You have money IN the bank. Bank owes you money.
In Cash Book: Debit Balance (Asset)
In Pass Book: Credit Balance (Liability for bank)
Example: Pass Book shows "By Balance ₹50,000"
- You have ₹50,000 in your account
- Bank owes you ₹50,000
Overdraft (Debit Balance in Pass Book)
Meaning: You have withdrawn MORE than your balance. You owe money to the bank.
In Cash Book: Credit Balance (Liability)
In Pass Book: Debit Balance (Asset for bank)
Example: Pass Book shows "To Balance ₹20,000 (OD)"
- You owe bank ₹20,000
- You've spent ₹20,000 more than you had
Comparison Table
| Aspect | Favourable Balance | Overdraft |
|---|---|---|
| Meaning | Money in bank | Money owed to bank |
| Cash Book | Debit Balance | Credit Balance |
| Pass Book | Credit Balance | Debit Balance |
| Nature | Asset | Liability |
| Interest | Bank pays you | You pay bank |
| Symbol | - | (OD) or (Dr.) |
How Overdraft Works
Scenario: You have ₹10,000 in bank. Bank gives you overdraft facility of ₹50,000.
You can withdraw: Up to ₹60,000 (₹10,000 own + ₹50,000 overdraft)
If you withdraw ₹65,000:
- Your balance: -₹5,000 (Overdraft of ₹5,000)
- You owe bank ₹5,000
- Bank charges interest on ₹5,000
BRS Impact
Starting with Favourable Balance
Cash Book: ₹50,000 Dr.
Pass Book: ₹50,000 Cr.
Starting with Overdraft
Cash Book: ₹20,000 Cr.
Pass Book: ₹20,000 Dr.
Important: The BRS process remains the same, just signs change!
Example BRS with Overdraft
Cash Book Balance: ₹10,000 Cr. (Overdraft)
Adjustments:
- Cheque issued not presented: ₹2,000
- Bank charges: ₹100
BRS:
| Particulars | Amount |
|---|---|
| Overdraft as per Cash Book | 10,000 |
| Add: Bank charges | 100 |
| Less: Cheque issued not presented | (2,000) |
| Overdraft as per Pass Book | 8,100 |
Quiz
Test Your Knowledge
Question 1 of 5
1. Favourable balance in Pass Book is shown as:
💡 Final Wisdom: "Favourable balance = Happy you. Overdraft = Bank is happy (they're earning interest from you)!"