FAR Cash · Updated November 2026
Bank Overdraft: Cash, Current Liability, or Netting Item?
A negative bank account is not automatically netted against positive cash in another account.
Separate account
An overdraft in one bank account generally represents an obligation to the bank and is commonly presented as a current liability.
Offsetting
Netting against positive cash requires an appropriate legal right of offset and the relevant accounting conditions.
Same bank is not enough
Simply using the same banking institution does not automatically justify net presentation.
Cash-flow connection
Changes in overdraft financing can also affect statement-of-cash-flows classification depending on the facts and applicable framework.
The takeaway
Bank overdrafts are generally liabilities unless specific offsetting conditions are met under the applicable guidance.
Related Summit guides
FAQ
Is every overdraft part of cash and cash equivalents?
No.
Can offsetting ever be appropriate?
Yes when the conditions are met.
Does having accounts at the same bank automatically permit netting?
No.