What type of entry serves as a preliminary notification before the actual transaction?

What type of entry serves as a preliminary notification before the actual transaction?

• A. Credit Entry
• B. Debit Entry
• C. Prenotification Entry
• D. Adjustment Entry

Answer: (C)

The correct answer is a Prenotification Entry. This type of entry is utilized in ACH transactions as a preliminary step that notifies the receiving financial institution about an upcoming direct deposit or debit transaction. The purpose of this entry is to verify that the recipient's account information is accurate before processing the actual transaction. Prenotification entries do not involve any actual funds being transferred; they serve merely as a test to ensure that the banking details provided are correct and that the institutions can effectively process subsequent transactions. This helps prevent issues such as incorrect account numbers or incompatible account types that could lead to failed transactions or erroneous debits. In the context of ACH processing, this initial entry is essential in ensuring smooth operations and increases the likelihood that future electronic payments will go through successfully.

The correct answer is a Prenotification Entry. This type of entry is utilized in ACH transactions as a preliminary step that notifies the receiving financial institution about an upcoming direct deposit or debit transaction. The purpose of this entry is to verify that the recipient's account information is accurate before processing the actual transaction.

Prenotification entries do not involve any actual funds being transferred; they serve merely as a test to ensure that the banking details provided are correct and that the institutions can effectively process subsequent transactions. This helps prevent issues such as incorrect account numbers or incompatible account types that could lead to failed transactions or erroneous debits.

In the context of ACH processing, this initial entry is essential in ensuring smooth operations and increases the likelihood that future electronic payments will go through successfully.