Question

which journal entry is prepared for a nsf check returned by the bank? a. no entry is prepared. b. debit cash and credit notes payable. c. debit accounts receivable and credit cash. d. debit cash and credit accounts payable.

Explanation:

An NSF (Non - Sufficient Funds) check means the check received (which was initially recorded as a cash receipt and a reduction in Accounts Receivable) is now invalid. So, we need to reverse the cash receipt (credit Cash) and reinstate the amount owed by the customer (debit Accounts Receivable) because the customer still owes the money. Option A is wrong as an entry is needed. Option B is for a note payable transaction, not NSF. Option D is for a payable situation, not relevant here.

Answer:

C. Debit Accounts Receivable and credit Cash.