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The bank statement for Tetra Company contained the following items: a bank service charge of $10;a credit memo for interest earned,$15;and a $50 NSF check from a customer.The company had outstanding checks of $100 and a deposit in transit of $300.
-The entry to record the customer's NSF check will:
A)increase the Accounts Receivable balance.
B)decrease the Cash account.
C)decrease equity.
D)increase the Accounts Receivable balance and decrease the Cash account balance.

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The NSF check means that the customer's payment bounced, so the company did not receive the cash. This will decrease the Cash account. However, the customer still owes the money, so this will increase the Accounts Receivable balance. Therefore, the correct entry to record the NSF check is to debit Accounts Receivable and credit Cash.

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