Bourne Incorporated reports a cash balance at the end of the month of $2,395. A comparison of the company's cash records with the monthly bank statement reveals several additional cash transactions: bank service fees ($76), an NSF check from a customer ($260), a customer’s note receivable collected by the bank ($1,000), and interest earned ($26). Required:Record the necessary entries the balance of cash. Transaction #1 record the entries that increase cash. Transaction #2 record the entries that decrease cash.

Increase in Cash/bank = $1000 + $26 = $1026

Decrease in Cash/bank = $76+$260 = $336

Explanation:

The entries for each transaction is as follows:

1 - Bank service charges:

Service charges exp Dr $76

Bank Cr $76

(Note: Bank has provided us with banking services, the charges of which is an expense for Bourne incorporated and the settlement of which will reduce our bank balance, a credit.)

2 - NSF check from a customer:

Entry:

Acc receivable Dr $260

Bank Cr $260

(Note: A NSF check is a non-sufficient funds check which implies that the customer doesn't have sufficient funds to pay for whatsoever services rendered by us. Upon receipt of such a check we must have increased our bank and decreased our receivable but since it has been dishonored we need to reverse the entry by decreasing our bank and increasing our receivable balance until it's settled by the customer.)

3 - Customer's note receivable collected by the bank:

Entry:

Bank Dr $1000

Receivable Cr $1000

(Note: Bank has received a note against a receivable which results in an increase in our bank balance and decrease in or respective customer account and/or receivable.)

4 - Interest earned:

Entry:

Bank Dr $26

Interest income Cr $26

(Note: The money deposited by Bourne Incorporated has earned interest which by nature is an income for Bourne. So Bank is debited and interest income is credited to increase both bank and income simultaneously.)