Every time I open the pages of Accounting Today and turn to the "Spirit of Accounting" column, I'm not sure whether I should don my clown outfit or sackcloth and ashes. The article titled "This accounting for cash is not outstanding" (Jan. 7-27, 2008, page 15) is no exception.

It isn't clear from the authors' words whether the checks in the "zero balance" bank account were negotiated on the day written, or when the transfer was made to cover the checks from another bank/bank account. It would clearly be a bank overdraft if the checks were negotiated before the transfer of funds to cover was made. This clearly would be a liability and should be stated as a bank overdraft in the currently liability section of the balance sheet at the top of the list.

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