Accompanying the bank statement was a debit memo for an NSF check received from a customer. What entry is required in the company's accounts?
A) debit Other Income; credit Cash
B) debit Cash; credit Other Income
C) debit Cash; credit Accounts Receivable
D) debit Accounts Receivable; credit Cash

Question

Quizplus · Accepted Answer

A debit memo for an NSF check means that the customer's check bounced due to insufficient funds. Thus, the company needs to decrease its accounts receivable and increase its cash balance. Therefore, the entry required is to debit Accounts Receivable and credit Cash.

Accompanying the Bank Statement Was a Debit Memo for an NSF