Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 48 - No. 36)
If a company overdraws its bank account, what is the impact on the accounting equation?
Assets decrease, liabilities increase.
Assets increase, liabilities decrease.
Assets increase, liabilities increase.
Assets decrease, liabilities decrease.
Explanation
Overdrawing creates a liability (the amount owed to the bank), and it decreases the company's cash or bank amount.
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