Very often, we hear terms like dishonored cheque and bank overdraft.
Dishonored cheque is a cheque which, when presented, is REFUSED payment by the bank because of insufficient fund or because it is not in order.
Bank overdraft is a facility that allows the current account holder to overdraw from his account up to an agreed sum.
Hence, we cannot assume that the bank account must always have a debit balance meaning there is still cash left in the bank. At times, because of the bank given this bank overdraft facility to the business, you can see the business have overdrawn its current bank account hence resulting in a CREDIT balance which is an overdrawn balance/overdraft facility given by the bank- the credit balance means that the business is owing to its lender which is the bank.