If a business deposits a customer's cheque and later learns that it is an insufficient funds cheque, the
A) bank will try to collect the amount.
B) general ledger balance will be less than the bank balance.
C) business will receive a credit memorandum from the bank.
D) business will receive a debit memorandum from the bank.

Question

Quizplus · Accepted Answer

When a business deposits an insufficient funds cheque, the bank will send the business a debit memorandum, indicating that the amount of the cheque cannot be credited to the account due to insufficient funds. This will increase the general ledger balance of the business but decrease the bank balance. The bank will not try to collect the amount because there are insufficient funds in the customer's account.

If a Business Deposits a Customer's Cheque and Later Learns