Tag: Bank Overdraft

Alex Trading is £5,000 overdrawn at his bank and then receives £2,000 from a credit customer in respect of an overdue invoice.

Which elements of the accounting equation will change due to this transaction?

Select ONE answer:

1. Assets and liabilities only
2. Liabilities only
3. Assets only
4. Assets, liabilities and capital

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – The overdraft liability will decrease, and receivables will decrease by an equal amount.
2. Not correct
3. Not correct
4. Not correct

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