Which of the Following Is Characteristic of a Credit Memo

question 17

Multiple Choice

Which of the following is characteristic of a credit memo and its relationship to a company's bank reconciliation procedures?

• A) It must be recorded as a credit to the balance per the customer's records.
• B) It is issued to notify a company of bank service charges that need to be recorded on the company's records.
• C) It is issued when a customer gives the company an NSF cheque that needs to be recorded on the company's records.
• D) It must be recorded as a debit to the balance per the company's records.

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Definitions:

Unadjusted Trial Balance

A listing of all the accounts and their balances from the ledger, before any adjustments, used to check the arithmetic accuracy of bookkeeping.

Aging of Receivable Method

An accounting technique used to estimate uncollectible debts by analyzing the age of accounts receivable.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may ultimately not be collectible.

Bad Debts Expense

Bad debts expense represents the amount of receivables a company estimates it will not be able to collect from customers over a period.