Notification by the bank that a customer's deposited cheque was returned NSF requires that the depositor make the following adjusting entry:
A)dr.Accounts Receivable cr.Cash
B)dr.Cash cr.Accounts Receivable
C)dr.Bank Charges Expense cr.Accounts Receivable
D)No adjusting entry is necessary.

Question

Quizplus · Accepted Answer

When a cheque is returned NSF (Non-Sufficient Funds), it means the cheque cannot be cashed due to insufficient funds in the issuer's account. The depositor must reverse the initial entry made when the cheque was deposited. The correct adjusting entry is to debit Accounts Receivable, indicating the amount is again owed to the depositor, and credit Cash, to reverse the increase in cash that was recorded when the cheque was initially deposited and assumed good.

Notification by the Bank That a Customer's Deposited Cheque Was