Overdraft Protection

Set up both the checking account and the overdraft account as bank accounts. The easiest way to record the traffic flow between the 2 accounts would be to use the bank transfer function. Record any overdraft fees incurred as bank charges or to an Overdraft Fee expense account if you want to track those expenses separate from normal bank charges. Don't forget to reconcile each account each month.

If the overdraft is a separate account I agree with Laura.

However, it sounds to me like the bank will simply cover any overdraft up to $10000 negative balance, with no money actually transferring between accounts. If that is so, I'd just leave the balance as negative - it's technically a loan from the bank but since the outstanding balance is the overdraft amount, it's easier this way. Any financial statements should show it as a Liability.

Correct. It depends on how the bank sets up the account(s). I've seen ODP setup as separate bank - savings like account as well as Line of credit liability accounts. Just mimic the way the bank handles the transactions otherwise you won't be able to reconcile the account(s).

Scott is right...there has been no transfer of money and i only have one acct. the bank just covers a neg amt up to 10000$ my statements show my account $xx as a negative, so therefore i should just leave the acct as is and just record it in the red? only one acct and nothing showing bank indebtness? my balance statement should show bank = neg right?

Correct. Otherwise you will never be able to reconcile the account each month.

ok..so another question...on my t2 balance sheet my code 2600-bank overdraft should be 0?

Why do you even need that account? Does an account exist at the bank?

no i don't , i'm just making sure that on my t2 I don't have to record it in anyway thanks I'm assuming you don't but i just want to make sure i;ve covered everything

thanks