Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

6. Internal Controls and Reporting Cash

Bank Reconciliation

Financial Accounting

6. Internal Controls and Reporting Cash

Bank Reconciliation

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Multiple Choice

On a bank reconciliation, a NSF (nonsufficient funds) check not yet recorded by the company is:

added to the bank statement balance

subtracted from the company's book balance

subtracted from the bank statement balance

added to the company's book balance

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Verified step by step guidance

Understand the concept of NSF (nonsufficient funds) checks: These are checks that a company has deposited but were returned by the bank due to insufficient funds in the payer's account. This means the company must adjust its records to reflect the reduction in cash.

Identify the impact of the NSF check on the company's book balance: Since the check was initially recorded as a deposit, the company's book balance is overstated and needs to be reduced.

Determine the correct adjustment: The NSF check is subtracted from the company's book balance because it represents a reduction in cash that was previously recorded.

Clarify why the adjustment is not made to the bank statement balance: The bank has already accounted for the NSF check by not crediting the company's account, so no adjustment is needed on the bank's side.

Record the adjustment in the company's books: Update the cash account and any related accounts to reflect the subtraction of the NSF check amount from the company's book balance.