A firm's bank reconciliation shows, in part, a book balance of $15,820, a deposit in transit of $300, an NSF check of $400, outstanding checks totaling $10,000, and a service charge of $20. Its adjusted book balance is: ?

The adjusted book balance is $15400

Explanation:

The book balance is the balance for cash/bank that is as per the accounts kept by the company in its books and can differ from the amount of balance as per bank  because of several transactions that are either recorded in the books and not by the bank or recorded by the bank and are not in the books.

To calculate the adjusted book balance, we need to adjust for transactions that are recorded by the bank and are not in the books.

Unadjusted cash balance as per books                    $15820

(-) NSF check                                                                ($400)

(-) Service charge                                                          ($20)

Adjusted cash balance as per books                          15400

NSF checks are checks that were recorded in books but due to Non sufficient funds, they cannot be added to the bank balance and should be returned to customers and reduced from the cash balance in books.

The service charges are deducted directly from the account by the bank and should be deducted from the book balance also.

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