Question

a company writes a check but does not have enough money to cover the balance. what is the journal entry for the charge assessed by the bank?

debit service charge fee and credit cash
credit service charge fee and debit cash
debit expenses and credit cash
credit expenses and debit cash

Explanation:

Identify the nature of the transaction

A bank assesses a fee (often called an NSF fee or service charge) when a company writes a check without sufficient funds. This fee represents an expense for the company and reduces its cash balance.

Determine the debit and credit accounts

An increase in an expense account is recorded with a debit, and a decrease in the cash asset account is recorded with a credit. Therefore, the company must debit an expense/fee account and credit Cash.

Match with the given options

The option "Debit Service Charge Fee and Credit Cash" correctly reflects this transaction by increasing the service charge expense and decreasing the cash asset.

Answer:

• Debit Service Charge Fee and Credit Cash (Correct answer)
• Credit Service Charge Fee and Debit Cash
• Debit Expenses and Credit Cash
• Credit Expenses and Debit Cash