14 February 2016
A Cash Credit Account is just another Bank Account. This is an overdraft account utilized for running day to day business and is usually secured by hyothecation of stocks and book debts to the bank. This is a system whereby the bank permits the withdrawal limit depending on the book value of stocks and book balances of debtors at the end of every month after the agreed margin at the time of sanction. Entries in the books of accounts are made just as in any other Bank Account.
When CASH CREDIT LIMIT is sanctioned no entries are made in the books of accounts. This is only a sanctioned limit. The concern can continue issuing cheques in excess of the balance in the account till the sanctioned limit is reached, i.e. the account can be overdrawn at any point of time till the Cash Credit Limit is reached.
All Entries in the Cash Credit Account are just ordinary entries in the Cash Book.
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