Use the following to answer questions 1?9:Indicate how each event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts.Increase = I Decrease = D No Effect = NA(Note that "No Effect" means that the event does not effect that element of the financial statements or that the event causes an increase in that element is offset by a decrease in that same element.) In preparing the bank reconciliation for Heath Company, a company employee found that the bank statement included an NFS check that the company had received from a customer paying its account at Heath Company.AssetsLiabilitiesStk. EquityRevenuesExpensesNet IncomeStmt of Cash Flows???????

Question

What will be an ideal response?

Answer 1

(N (NA) (NA) (NA) (NA) (NA) (D)
Recording the NSF check increases one asset (accounts receivable) and decreases another asset (cash). This asset exchange transaction has no overall effect on total assets. There is no effect on stockholder's equity or net income. Since the company must reduce its Cash account, this transaction is reported as a cash outflow for operating activities on the statement of cash flows.