How do you record NSF checks when adjusting entries in accounting?
NSF checks represent Not Sufficient Funds checks where the check issuer account has fewer finances than the finances written on the check for transfer. Therefore, the transaction is not made complete since the payee has not received the finances, so the company has to make such details in the financial records to ensure balanced entries regarding the liabilities and assets within a given financial year.
Answer and Explanation:
NSF check causes an increase in the amounts payable because the firm expects the finances from the client who sent an NSF check. On the other hand, the current assets account decreases since no money has been received within that period as the transaction was not complete.
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The system of checks and balances was created within the United States federal government to prevent the abuse of power. Learn about the purpose, importance, and real-world examples of checks and balances.