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

Which of the following actions should be taken when a check is returned from the bank for non-sufficient funds (NSF)?

Increase the cash balance in the company's books by the amount of the NSF check.

No action is required since the bank will automatically adjust the balance.

Decrease the cash balance in the company's books by the amount of the NSF check.

Record the NSF check as a bank service charge.

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Verified step by step guidance

Understand the concept of a non-sufficient funds (NSF) check: An NSF check occurs when a check deposited by the company is returned by the bank because the payer's account does not have enough funds to cover the check amount.

Identify the impact of an NSF check on the company's books: Since the check amount was initially recorded as an increase in the company's cash balance, the returned check means the cash balance is overstated and needs to be reduced.

Determine the correct action: The company should decrease the cash balance in its books by the amount of the NSF check to reflect the accurate cash position.

Record the NSF check in the company's accounting records: Create a journal entry to decrease the cash account and record the NSF check amount in an appropriate account, such as 'Accounts Receivable,' if the payer still owes the money.

Review the bank reconciliation process: Ensure the NSF check is accounted for during the bank reconciliation to align the company's book balance with the bank statement balance.