Flynn Company's monthly bank statement showed the ending balance of cash of $18,500.The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service charges of $30 and the EFT from a customer in payment of the customer's account of $1,500.
-Use the information above to answer the following question.What journal entry should be recorded by Flynn Company for the NSF check returned?

Question

Quizplus · Accepted Answer

When a NSF (non-sufficient funds) check is returned by the bank, it is recorded as a reduction in the amount of cash received from the customer. Therefore, the appropriate journal entry is to debit Accounts Receivable (to reduce the amount owed by the customer) and credit Cash (to reflect the reduction in the amount received) for the amount of the NSF check ($700 in this case). Choice A reflects this journal entry.

Flynn Company's Monthly Bank Statement Showed the Ending Balance of Cash