Answer to Question #263365 in Accounting for nicole

Question

TOPIC: BANK RECONCILIATION

Directions: Research for the following questions and answer concisely using less than 5 sentences for each response.

1. Why are NFS Checks (not sufficient funds check) considered a debit memo?

2. Is a certified check considered to be an outstanding check?

Answer 1

The specific use of NSF checks to notify customers of any debit adjustment made to their account is what makes them to be referred to as debit memo.

A certified check is not considered an outstanding check when preparing a bank reconciliation because both parties are informed of it. A check is paid out of bank funds upon certification and it therefore becomes an obligation of the bank.