In the normal operation of business, you receive a check from a customer and deposit it into your checking account. With your bank statement, you are advised that this check for $775 is "NSF." The bank also informs you that due to the amount of activity on your business account the monthly service charge is $75. During a bank reconciliation, you will
A) subtract both values from balance according to bank
B) add both values to balance according to books
C) add both values to balance according to bank
D) subtract both values from balance according to books

Question

Quizplus · Accepted Answer

When a customer's check is returned as NSF (non-sufficient funds), it means that the check has bounced and the funds are not available in the customer's account to cover the amount of the check. Therefore, you would need to subtract this value from the balance according to your books. Similarly, the monthly service charge is a fee assessed by the bank, so it should also be subtracted from the balance according to your books. Therefore, the correct option is to subtract both values from the balance according to your books.

In the Normal Operation of Business, You Receive a Check