Notification by the bank that a deposited customer cheque was returned NSF requires that the company make the following adjusting entry:
A) Accounts Receivable
$\quad $$\quad $Cash

B) Cash
$\quad $$\quad $ Accounts Receivable

C) Miscellaneous Expense
$\quad $$\quad $Accounts Receivable

D) No adjusting entry is necessary.

Question

Notification by the bank that a deposited customer cheque was returned NSF requires that the company make the following adjusting entry:
A) Accounts Receivable 
$\quad $$\quad $Cash

B) Cash
$\quad $$\quad $ Accounts Receivable

C) Miscellaneous Expense 
$\quad $$\quad $Accounts Receivable

D) No adjusting entry is necessary.

Quizplus · Accepted Answer

When a bank notifies a company that a deposited customer cheque was returned due to Non-Sufficient Funds (NSF), the company must reverse the initial recording of the cheque as cash. This involves debiting Accounts Receivable to increase it (indicating the customer still owes the money) and crediting Cash to decrease it (removing the amount that was initially recorded as received).

Notification by the Bank That a Deposited Customer Cheque Was \quad

Notification by the Bank That a Deposited Customer Cheque Was $\quad$