Flynn Company\'s monthly bank statement showed the ending balance of cash of $18

Question

Flynn Company's monthly bank statement showed the ending balance of cash of $18,500. The bank reconciliation for the period showed an adjustment for a deposit in transit of $1,500, outstanding checks of $2,000, a NSF check of $700, bank service charges of $30 and the EFT from a customer in payment of the customer's account of $1,500.

4. Use the information above to answer the following question. What journal entry should be recorded by Flynn Company for the NSF check returned?

A)    Accounts receivable                              700
            Cash                                                             700
B)    Cash                                                       700
            Accounts receivable 700
C)    Cash                                                       700
            Accounts payable                                        700
D)    No journal entry is necessary

A. Option A
B. Option B
C. Option C
D. Option D

Explanation / Answer

adjustment NSF check of $700 to be done in GL;

While recieving the check the entry was ;

Accounts receibvable Cr $700

Cash Dr $700

Now the check has been returned due to Not Sufficient Fund

So the earlier entry is to be revesred.

Now the JV will be,

Accounts Receivable   Dr 700

                          Cash   Cr 700

So option A. is correct

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