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 from balance according to books.
C) add both values from balance according to bank.
D) subtract both values from balance according to books.

Question

Quizplus · Accepted Answer

Since the customer's check was returned as "NSF" (non-sufficient funds), it means that the bank did not honor the payment, and the funds were not actually deposited into the business's account. Therefore, the check amount should be subtracted from the balance according to the business's books. Additionally, since the bank charged a monthly service fee, this fee was deducted from the account by the bank and should also be subtracted from the balance according to the business's books. Therefore, both values should be subtracted from the balance according to books in order to reconcile the account.

In the Normal Operation of Business You Receive a Check