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CC & Current A/c

hari (MT) (64 Points)

22 November 2007

Dear All,

I am a CS student – I am interested to know the difference between CC A/c and Current A/c (OD Facility)

As far i know in both the above accounts it is managed by hypothecation of stocks, Semi FG, FG.

Since there is backing of stocks,etc in both the accounts – How are these both still different - Please correct me if i am wrong about this concept and please let me know more differences ?

Regards

Harish

CS Student

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6 Replies

Nitesh Jain (CA Final Student & Manager(Accounts & Taxation)) (91 Points)
Replied 22 November 2007

Mr. Harish, CC Stands for Cash Credit Facility. Current A/c.(O/D Facility) is temporary overdraft facility which is available for a short period. Both above are type of short term loans. Under Cash Credit Facility, you have to hypothecate your Stock and Book Debts. This facility is to be renewed every year or as per the loan agreement with the Bank. Under Overdraft Facility, you are allowed to withdraw money from your current account exceeding the limit specified in loan agreements. Or you can say if your current account as per bank statement shows Debit Balance, it is said that the account is overdrawn. The overdrawing is allowed on case to case basis considering clients business and transactions.

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S.RAVICHANDRAN (FINANCE MANAGER) (422 Points)
Replied 22 November 2007

current A/c does not necessarily mean overdraft a/c. There may be current accounts which do not have overdraft facility. But Cash Credit Account ( CC a/c) necessarily mean overdraft account with hypothecation of stocks, semi finished and finished goods. Hope you have understood the difference.

hari (MT) (64 Points)
Replied 22 November 2007

Dear Mr.Nitish Jain & Mr.S.Ravichandran, Thank you for the reply.If i try to understand from your replies is it correct to say that in an CC A/c it is not possible to withdraw above the limit and in Current (OD) A/c we can with draw above the limit. And another diffrence is CC A/c = Charge of Stocks Current A/c (OD) = Pledge of Stock Whether i am correct ? Waiting for reply...... With warm regards Harish

Prakash Popat (3134 Points)
Replied 22 November 2007

Hypothecation and pledge both R different, Normally CC limit provided by bankers based on Working capital Requirement assessment by Bankers,By analysis previous track records of few years,Credit Appraisal Scheme.(CMA) Form,Whereas Current accounts Od facilities may be based on pledge of fixed deposits stocks Titles,etc for short terms duration.

pritpal singh bindra (chatered accountant) (34 Points)
Replied 23 November 2007

Hi Hari
c/c facility is granted against hyp. of stocks for
running day to day operations of business.o/d
is against assets,titles deposits for n number
purposes.Both the facilities are initially for one yearand are generally renewed subject to certain conditions.Term can be long or short as per requirement of customer
P.S.BINDRA F.C.A
PROFESSOR
ICFAI BUSINESS SCHOOL
CHANDIGARH