Which of the following statements is false regarding a credit memo and its relationship to a company's bank reconciliation procedures?
A)It must be recorded as a credit to the balance per the customer's records.
B)It is issued to notify a company of interest earned which needs to be recorded on the company's records.
C)It is issued when the bank collects a note on behalf of the company.
D)It must be recorded as a debit to the balance per the company's records.

Question

Quizplus · Accepted Answer

Credit memos are adjustments made by a bank to a company's account, often for transactions like interest earned or notes collected by the bank on behalf of the company. They increase the company's bank balance, so in the context of bank reconciliation, they should be recorded as an increase to the balance per the company's records, not as a credit to the customer's records. Choices B and C correctly describe situations where a bank might issue a credit memo, and D correctly states that it should be recorded as a debit (increase) to the company's balance.

Which of the Following Statements Is False Regarding a Credit