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. Which of the following will be caused by recording the customer's NSF check?
A)Accounts receivable increases.
B)Cash decreases.
C)Stockholders' equity decreases.
D)Accounts receivable increases and cash decreases.

Question

Quizplus · Accepted Answer

Recording the customer's NSF check will cause an increase in accounts receivable (since the customer now owes the company money for the bounced check) and a decrease in cash (since the check cannot be deposited).

The Bank Statement for Tetra Company Contained the Following Items