Question

The documentation with the bank statement shows a debit memo for bank service charges. Based on this, what possible entry would be made in the company's accounts?

a. debit Miscellaneous Administrative Expense; credit Cash
b. debit Cash; credit Other Income
c. debit Accounts Payable; credit Cash
d. debit Cash; credit Accounts Payable

Answer 1

The possible entry in the company's accounts would be: a. debit Miscellaneous Administrative Expense; credit Cash.

Step-by-step explanation:

The possible entry in the company's accounts would be:

a. debit Miscellaneous Administrative Expense; credit Cash

When a bank service charge is recorded, it is classified as a miscellaneous administrative expense because it is an expense incurred for the bank's services. This expense is debited to the Miscellaneous Administrative Expense account and the Cash account is credited to reflect the decrease in the company's cash balance.