Following the February bank reconciliation,the accountant made the following entry in the journal of Kincaid Company:

Which of the following is a possible explanation for this journal entry?

Question

Following the February bank reconciliation,the accountant made the following entry in the journal of Kincaid Company:

Which of the following is a possible explanation for this journal entry?

Quizplus · Accepted Answer

When an NSF check is returned,the bank will deduct the amount of the check from the company's bank account balance.Kincaid would have been advised of the NSF check through a debit memo that appears on the bank statement.Since there were insufficient funds for payment,Kincaid didn't actually receive cash from the customer,so it must decrease its Cash account with a credit.The company will still try to collect the money from the customer,so it will increase Accounts Receivable with a debit.

Following the February Bank Reconciliation,the Accountant Made the Following Entry