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Question 1 Information was taken from the books of Sithole Traders for May and lune 2019 Bank reconciliation statement of Sithole Traders as at 31 May 2019 Details Amount (R) Balance per bank statement (favourable) Outstanding cheques: No, Cq358 (dated 28 December 2018) 5 242 3 140 6 178 2 132 11 310 5 102 No. Cq425 (dated 28 May 2019) No. Cq427 (dated 31 May 2019) Outstanding deposits Balance per bank account on comparing the June 2019 cash journals and the bank reconciliation statement at 31 May 2019 with their bank statement for June 2019, the bookkeeper of Sithole Traders identified the following 1. The provisional totals for the cashbook (cash journals) at 30 June 2019, before amy amendments: Cashbook receipts RS2 750 r Cashbook payments R24 500 2, All items appearing on the bank reconcilation statement at 31 May 2019 appeared on the June bank statement, except for cheque no. Cq358. Ca358 was previously made out to Blyton Information Systerns.し// The following cheques dated 30 June 2019, were in the lune cashbook payments, but did not appear on the June bank statement: C0439 amount R6 480 Cq441 amount R10 476

Answer 1

The points given below clarifies the difference between overdraft and loan, considering various parameters:

1. An arrangement in which the bank customer is permitted to withdraw amount more than the credit balance standing in the current account is called overdraft. The fixed sum of money borrowed for a certain term, against security and is assumed to be repaid with interest in future is called the loan.
2. While overdraft is a credit facility provided by the bank to its customers, the loan is the capital borrowed by the customer from the bank.
3. Overdraft is a source of short-term finance; that fulfils the working capital requirement of the company. On the other hand, the loan is a means of long-term finance; that helps in acquiring fixed assets like land, building, furniture, etc.
4. Interest on overdraft is charged on the amount overdrawn and not on the limit sanctioned, whereas interest on the loan is charged on the whole sum sanctioned.
5. Interest on overdraft is calculated on a daily basis, till the amount overdrawn is repaid completely. Conversely, loan interest is computed on a monthly basis, keeping in mind the amount loaned and the term.
6. The repayment of overdraft can be made through deposits made in the bank account. As against this, the amount of loan can be repaid, depending on the type of loan, i.e. if it is a demand loan, the sum has to be paid back on demand of the banker, but in the case of time loan, the sum is payable in equated monthly installments (EMI).
7. For availing overdraft facility, an individual or entity must have a current account with the respective bank. On the contrary, there is no such pre-condition to be a bank account holder for taking a loan.