Final answer:
To account for an NSF cheque, reverse the receipt in the receipts journal by debiting accounts receivable and crediting cash in the general journal. This effectively cancels the previous cash entry due to the bounced cheque.
Step-by-step explanation:
When a NSF cheque (non-sufficient funds cheque) is received, it means that the cheque cannot be processed because there aren't enough funds in the account it's drawn on to cover the cheque amount. In accounting, to account for an NSF cheque, you would typically reverse the receipt in the receipts journal. This involves debiting accounts receivable and crediting cash in the general journal to show that the cash previously recorded is no longer available due to the cheque being returned unpaid.
- Reverse the receipt in the cash sales journal with a payment by cheque - This is not the correct action as it involves sales, not receipt reversals.
- Enter a sales invoice for a negative amount - This action does not correctly address the issue of the NSF cheque.
- Reverse the receipt in the receipts journal - This is partially correct but needs further clarification on the specific accounts to be debited and credited.
- Debit accounts receivable and credit cash in the general journal - This is the correct action, as it reflects the NSF cheque in the accounts accurately.
When you use a check for payment for goods and services, it's a promise that the funds are available in your account. The store or entity will deposit the cheque and the money is transferred from your account to theirs. An overdraft occurs when there are not sufficient funds in the account to cover the cheque or other withdrawals, leading to the bank covering the amount as a short-term loan, often with fees attached.