If a bank reconciliation included a credit memo for a $2,000 note collected with an additional $20 of interest revenue, the entry to record this reconciling item would include a:
A)credit to note receivable for $2,020.
B)credit to cash for $2,020.
C)debit to cash for $2,020.
D)No entry is required.

Question

Quizplus · Accepted Answer

A bank reconciliation process involves adjusting the bank's and the company's records to match. The credit memo for a note collected by the bank on behalf of the company increases the company's cash balance. Therefore, the company needs to record this transaction by debiting cash to increase its balance. The entry would include a debit to cash for the total amount received, $2,020, reflecting both the principal and the interest.

If a Bank Reconciliation Included a Credit Memo for a $2,000