ReconciledrillNSF check
An NSF check is a customer's check that was deposited and recorded but then returned by the bank because the customer's account lacked funds. The bank reverses the deposit, so subtract the amount from the book balance and post Dr Accounts Receivable / Cr Cash to reinstate what the customer still owes.
Syntax
Book side: subtract NSF amount (and any NSF fee). Entry: Dr Accounts Receivable [amount] / Cr Cash [amount]| Part | What it is |
|---|---|
Side | Book side, subtract |
Receivable | The customer owes the money again, plus any fee you pass on |
NSF fee | Charged by your bank; expense, or billed to the customer |
Examples
Book balance 5,000; statement shows returned check from customer Lee 240Result: Adjusted book balance 4,760. Entry: Dr Accounts Receivable (Lee) 240 / Cr Cash 240.
NSF check 240 plus bank returned-item fee 15Result: Subtract 255 on the book side. Entries: Dr Accounts Receivable 240 / Cr Cash 240 and Dr Bank Service Charges 15 / Cr Cash 15.
Company policy is to bill the customer the 15 feeResult: Dr Accounts Receivable 255 / Cr Cash 255; the customer now owes 255.
Common mistakes
- Writing off the sale as bad debt immediately: the customer still owes it; reinstate the receivable and collect.
- Adjusting the bank side: the bank already took the money back.
- Forgetting the NSF fee: it is a separate line on the statement and a separate expense.
Practice NSF check
These drills check your answer on live data, free, no account needed.
- A customer's check bouncedClassify every line on the bank statement and in the cash book, then enter the adjusted bank and book balances.
- Recording a bounced checkClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.
- Everything from the bankClassify every line on the bank statement and in the cash book, then enter the adjusted bank and book balances.
Questions
What does NSF mean?
Non-sufficient funds: the payer's bank account did not have enough money to cover the check.
Is an NSF check added or subtracted in a bank reconciliation?
Subtracted from the book balance. The books counted the deposit; the bank reversed it.
What if the customer pays again?
Record the new receipt normally: Dr Cash / Cr Accounts Receivable. The reinstated receivable is cleared.
Related
- NSF check journal entryThe journal entry for an NSF (bounced) check: debit Accounts Receivable and credit Cash for the check amount, then record the fee as an expense or bill it.
- Adjusted book balanceAdjusted book balance = ledger cash + interest + notes collected - service charges - NSF checks, plus or minus book errors. Examples and the matching entries.
- Bank service chargeA bank service charge appears on the statement before the books know about it. Subtract it from the book balance and post Dr Bank Fees / Cr Cash.