What does the credit balance of bank account in cash book mean?

Overdraft

The correct answer is option 3- Overdraft.

In the double column cash book, there are two columns of amount on each side of the cash book. One for the cash and other for the bank. The bank column is balanced in the same way as the cash column. However, in the bank column, there can be credit balance also because of overdraft taken from the bank. Overdraft is a situation when cash withdrawn from the bank exceeds the amount of deposit. Entries in respect of cheques received should be made in the bank column of the cash book.