Question

Following is a bank reconciliation for Zocar Enterprises for June 30, 2018.

		Cash Account					Bank Statement
Balance as of 6/30/2018		$	25,220				$	21,265
Deposit in transit								4,675
Outstanding checks								(400	)
Note collected by bank			1,065
Bank service charge			(45	)
NSF check			(700	)
Adjusted cash balance as of 6/30/2018		$	25,540				$	25,540

As part of the normal process for handling an NSF check, the accounting clerk has notified the customer that their account did not contain sufficient funds to pay the balance owed to the company. The customer was told that they will need to provide an alternative form of payment to cover the outstanding balance.

Required

1. Prepare the adjustment that the clerk would have made to record the NSF check.

Adjustment to______ accounts receivable by_________ and_________ cash by__________

Answer 1

Answer: Adjustment to debit accounts receivable by $700 and credit cash by $700.

.

Explanation

The reason to debit accounts receivable is to increase the accounts receivable balance (by $700) as the cash from the customer is not actually received.

The reason to credit accounts receivable is to decrease the cash balance (by $700) as the cash from the customer is not actually received.