NSF reversal is matched to the original NSF payment so both cancel each other out.

• A. False
• B. Not sure
• C. It depends on the transaction
• D. True

Answer: (D)

NSF reversal cancels the effect of the original NSF payment by directly referencing and offsetting that same item. When the initial payment was recorded, it changed the cash account and the vendor liability. The reversal is posted against the original NSF entry, reversing the exact amounts: the cash increases back and the vendor payable is restored to its prior state. For example, if the original entry decreased cash and decreased the payable by the same amount, the reversal would increase cash and increase the payable by the same amount, resulting in the balances returning to what they were before the NSF event. In practice, this mirroring ensures the two entries offset, so the net effect is zero, aside from any separate fees that might be assessed.