If a cheque marked NSF is returned from the bank, an adjusting entry crediting cash is needed.

Question

Quizplus · Accepted Answer

A cheque marked NSF indicates that there are insufficient funds in the account to cover the payment, therefore the cheque will not be honored and will be returned from the bank. As a result, the amount of the cheque needs to be deducted from the account and credited to cash in the company's accounting records.

If a Cheque Marked NSF Is Returned from the Bank