An NSF check, short for ‘non-sufficient funds’ check, is a check that has been issued but cannot be processed because the account it is drawn on does not have enough funds to cover the amount. When a check bounces due to insufficient funds, it results in a negative impact not only for the individual or business that received the check but also for the account holder.
In terms of bank reconciliation, which is the process of comparing your bank statement with your own records to ensure accuracy, an NSF check plays a crucial role. During this process, when you notice an NSF check that has been processed, it indicates that the expected funds from that check have not been credited to your account. As a result, you must adjust your books accordingly.
To reflect an NSF check on a bank reconciliation, you typically need to:
- Subtract the amount of the NSF check from your available cash balance in your records.
- Make a note of the NSF check to track the amount owed by the check issuer.
This adjustment helps ensure your financial records accurately represent the actual funds available for use, thereby maintaining financial integrity.