What are non-sufficient funds (NSF) checks? How does a NSF check affect a bank reconciliation?
What will be an ideal response?
NSF checks are checks that a company obtains from its customers and deposits in its checking account. However, when the checks are submitted to the customers' banks for payment, the banks refuse payment because there is insufficient money in the customers' account. The amount of an NSF check is deducted from the unadjusted book balance on a bank reconciliation.
The company is advised of NSF checks through debit memos that appear on the bank statement. The depositor deducts the amounts of the NSF checks from the unadjusted book balance in the process of determining the true cash balance.
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