Rex Company's Bank Statement Analysis: Understanding NSF Check

What does it mean when Rex Company's bank statement shows a $200 NSF check? The presence of a $200 NSF (non-sufficient funds) check on Rex Company's bank statement indicates that a check written by Rex Company has bounced due to insufficient funds in the account. In this scenario, how should the $200 NSF check be accounted for to determine the true cash balance?

Understanding NSF Checks

NSF checks occur when there are not enough funds in a bank account to cover a check that has been written. When a check bounces due to insufficient funds, the bank will typically return the check to the depositor and deduct the amount of the check from the account balance.

Resolution of NSF Checks

When analyzing a bank statement that includes an NSF check, it is crucial to adjust the account balances accordingly to reflect the true cash position. In the case of Rex Company's bank statement with a $200 NSF check, the correct approach is to subtract the amount of the NSF check from the unadjusted bank balance.

By subtracting the $200 NSF check from the unadjusted bank balance, we arrive at the true cash balance that considers the funds actually available in the account after accounting for the bounced check. This adjustment ensures that the financial records accurately reflect the amount of money accessible to Rex Company.

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