Krieger Company's bank statement included an NSF check written by one of its customers. What effect will the entry to recognize the NSF check have on the company's financial statements?

Question

Quizplus · Accepted Answer

When the NSF check is recognized, it will result in a decrease to Krieger Company's cash balance and an increase to its accounts receivable balance (since the customer still owes the money). This will be reflected on the company's financial statements, specifically the balance sheet (with a decrease in the cash line item and an increase in the accounts receivable line item) and the cash flow statement (with a decrease in the cash flow from operating activities). There will be no effect on the income statement since the revenue was already recognized when the customer made the purchase.

Krieger Company's Bank Statement Included an NSF Check Written by One