Which journal entry is prepared for a NSF check returned by the bank?
A)No entry is prepared.
B)Debit Cash and credit Accounts Payable.
C)Debit Cash and credit Notes Payable.
D)Debit Accounts Receivable and credit Cash.

Question

Quizplus · Accepted Answer

When a bank returns a check due to insufficient funds (NSF), the company must reverse the initial entry that recognized the receipt of cash. This involves debiting Accounts Receivable to increase it, showing that the customer still owes the money, and crediting Cash to decrease it, reflecting the removal of the funds that were initially recorded.

Which Journal Entry Is Prepared for a NSF Check Returned