Accounting Fundamentals Certification (AFC) Practice Test 2025 – The Comprehensive All-in-One Guide to Exam Success!

Question: 1 / 400

When the bank service charge is recorded, what happens to the cash account?

It increases

It decreases

When a bank service charge is recorded, the cash account decreases. This occurs because the service charge represents an expense that reduces the overall cash balance of the company. When the service charge is applied, the bank deducts this amount from the account, leading to a reduction in the cash available. It is an outflow of funds, reflecting that the company has incurred an expense. In accounting terms, expenses decrease equity, which in turn lowers the cash balance on the balance sheet. Thus, the correct understanding of the impact on the cash account following the recording of a bank service charge is that it indeed decreases.

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It remains the same

It is transferred

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