Question

Enclosed with the bank statement received by Sydney Company at October 31 was an NSF check for $300. No entry has yet been made by the company to reflect the bank's action in charging back the NSF check. During preparation of the bank reconciliation, the NSF check should be:

Answer 1

The NSF check should be deducted from Sydney Company's balance per books during the preparation of the bank reconciliation.

Step-by-step explanation:

During the preparation of the bank reconciliation for Sydney Company, the NSF check for $300 that was enclosed with the bank statement and charged back by the bank needs to be addressed. To reflect the bank's action, Sydney Company should deduct the amount of the NSF check from the balance per books. This is because the check that was initially recorded as a deposit has now been returned unpaid, thus no longer contributing to the company's available funds.