Final answer:
A Non-sufficient funds (NSF) check is treated as an outstanding check on the bank reconciliation. This means that the check was written and recorded in the company's books, but it hasn't cleared the bank yet. The NSF check is subtracted from the company's book balance to reflect the actual cash available in the account.
Step-by-step explanation:
A Non-sufficient funds (NSF) check is treated as an outstanding check on the bank reconciliation. This means that the check was written and recorded in the company's books, but it hasn't cleared the bank yet. When reconciling the bank statement, the NSF check is subtracted from the company's book balance to reflect the actual cash available in the account.
For example, if the company's book balance is $1,000 and there is an NSF check for $100, the company's adjusted book balance would be $900.
It's important to note that if the NSF check eventually clears the bank, it should be re-added to the company's book balance.