A service offered by financial institutions that allow a business to spend in excess of the amount in its account, up to a predetermined limit; the cheapest and most flexible form of borrowing for most businesses.

• A. Revenue expenditure
• B. Capital expenditure
• C. Overdrafts
• D. Debentures

Answer: (C)

Overdrafts are a bank facility that lets a business spend beyond its current account balance up to an agreed limit. This is a flexible, short-term form of financing because you only pay interest on the amount you actually overdraw, and you can withdraw or repay as needed without a fixed repayment schedule. This makes it cheaper and easier to manage cash-flow gaps, which is why it’s considered a convenient option for day-to-day working capital.

Revenue expenditure refers to the ongoing costs of running the business (like utilities, wages, or raw materials) and is not borrowing. Capital expenditure is spending on long-term assets (such as equipment or buildings). Debentures are long-term debt instruments raised from investors, not a bank facility used for day-to-day funding.