Which one of the following would not cause a bank to debit a depositor’s account?
March 21, 2009 by Accounts Receivable Factoring
Filed under More Factoring Answers
Can you answer madisonmaiden’s question about Factoring?:
a. Bank service charge
b. Collection of a note receivable
c. Checks marked NSF
d. Wiring of funds to other locations
Invoice Discounting
a. Bank service charge
b. Collection of a note receivable
c. Checks marked NSF
d. Wiring of funds to other locations
Invoice Discounting
Factoring Feedback: ii have no idea im still in high school
Factoring Feedback: debit means take away, they all seem like they would, if you’re wiring money from your bank account.
Factoring Feedback: b - tell your teacher I said so…this should be in Homework Help - not Personal Finance
Factoring Feedback: Sounds like a test question. For each, set up the journal entry. Would money moving into or out of the customer’s account?
Factoring Feedback: I say C. If the check is non-sufficient funds (NSF), then that means there is no money in the account. Therefore, how could they debit any out? And further, they wouldn’t debit money out, they would simply send the check back to the presenting bank.
Factoring Feedback: We don’t have your textbook to read–so we’re guessing. Your textbook has the definitions.
Bank Service Charge, takes a fee from you.
Wiring of Funds, takes the funds from your account.
Checks marked NSF are an it depends question. If a I deposit a check into my bank account, my bank will give me instant credit for it. Then if the check bounces and comes back to me, they will debit my account to get their money back. But this is because I have good credit. If my account was new, iffy, or the check was really big, they wouldn’t give me credit until the check didn’t bounce. And if I didn’t get the money up front, there wouldn’t be anything to get back.
Collection of Note Receivable. Whose note receivable? The bank’s? If you owe them money, they can take it out of YOUR account. If they collect money on your behalf, they will be crediting it to your account, not debiting it.
Factoring Feedback: The simplistic but incomplete answer is “b”. Collection of a receivable is a credit to your account if the receivable is owed to you. If however the receivable is chargeable to you which is more likely, (car payment, etc.) it becomes a debit. So the conditionally correct answer is “b.”
However, The item marked “NSF” (non-sufficient funds) should properly show as two entries. First would be a credit to your account in the amount of the check; the second would be a debit to your account having been returned by the payor bank for the removal of the credit entry.
jon b is looking at this as a physical function…it is not; it is an accounting function. I can’t have minus $50 in my pocket, but I can have minus $50 in my checking account.
Factoring Feedback: Back to basics … debit means left, credit means right … assets (e.g. a savings account) are increased by a credit and decreased by a debit … liabilities (e.g. a loan) are increased by a debit and decreased by a credit.
So from the customer’s perspective credit good, debit bad. So you are just looking for the good news to the customer.
A - bad
B - good
C - bad
D - bad