In a bank reconciliation, a $400 NSF cheque is:
A)deducted from the book balance.
B)added to the book balance.
C)deducted from the bank balance.
D)added to the bank balance.

Question

Quizplus · Accepted Answer

An NSF (Non-Sufficient Funds) cheque is a cheque that cannot be processed because the account holder does not have enough funds. In a bank reconciliation, it is deducted from the book balance because the company initially recorded the cheque as a deposit, increasing its book balance. When the cheque bounces, the company must reverse this entry, effectively reducing its book balance to reflect the true amount of cash available.

In a Bank Reconciliation, a $400 NSF Cheque Is