Q.Kavya Traders had a Bank balance of ₹5,000 (debit) on 1 November 2026. During November, it paid a supplier by cheque ₹9,000 and deposited a cheque received from a customer of ₹2,000, which was duly collected. No other bank transactions occurred. Compute the closing Bank balance and state its nature.

Unlike the Cash column, the Bank column can go into a credit balance — an overdraft — when payments through the bank exceed what was available.

Bank column, Dr side: Balance b/d ₹5,000 + Cheque collected from customer ₹2,000 = ₹7,000. Bank column, Cr side: Paid to supplier by cheque ₹9,000.

Since the credit side (₹9,000) exceeds the debit side (₹7,000) by ₹2,000, the Bank column cannot show a debit balance — instead it shows a CREDIT balance of ₹2,000, carried down to December as 'Balance b/d (Cr)'. This ₹2,000 represents a Bank Overdraft — the bank has, in effect, allowed Kavya Traders to pay out ₹2,000 more than it actually had, and this amount is a LIABILITY of the business, shown on the liabilities side of the Balance Sheet (never as an asset). …

Students sometimes force the Bank column to show a debit balance no matter what, as they've been trained to expect for the Cash column — but a Bank column showing more payments than receipts is a perfectly valid and co …