Question

To enter a NSF cheque - A) reverse the receipt in the cash sales journal with a payment by cheque B) enter a sales invoice for a negative amount C) reverse the receipt in the receipts journal D) debit accounts receivable and credit cash in the general journal

Answer 1

To correctly record the NSF cheque, the entry would be to debit Accounts Receivable and credit Cash in the general journal, reflecting the customer's increased debt and the decrease in the company's cash balance.

Step-by-step explanation:

To enter a NSF cheque correctly into the accounting records, the correct action would typically be to reverse the original transaction. This is done by debiting the Accounts Receivable account, since you are increasing the amount that the customer owes you due to the bounced cheque and crediting the Cash account to reflect the decrease in your bank balance caused by the cheque not clearing.

Therefore, the correct entry in response to the question is:

• Debit Accounts Receivable
• Credit Cash

This entry is recorded in the general journal, not a sales journal or cash receipts journal, because it is an unusual or infrequent transaction — not part of the day-to-day sales or cash receipts.