A company has a bank overdraft of $5,000 in one bank account and a positive balance of $12,000 in another account at a different bank. How should the overdraft be reported?
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AAs a current liability, because the accounts are at different banks
BNetted against the positive balance, showing $7,000 cash
CAs a contra-asset reducing total cash
DDisclosed only in the notes to the financial statements
✓ Correct answer: A. As a current liability, because the accounts are at different banksBank overdrafts are generally reported as current liabilities. Overdrafts at one bank may only be offset against positive balances at the SAME bank, not at different institutions. Since these are different banks, the overdraft must appear as a liability.
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