What adjustment needs to be made to company books when accounting for an NSF check from a customer?

When accounting for a Non-Sufficient Funds (NSF) check from a customer, the correct adjustment to company books involves reducing the cash balance to reflect the fact that the check has bounced and cannot be cashed. The amount that was initially recorded as an increase in cash from the customer's payment must be reversed.

If the correct answer indicates a net decrease in cash of $460, this suggests that the original payment from the customer, which was recorded in cash, totaled this amount. When it becomes clear that the check is not valid due to insufficient funds, this amount must be deducted from the cash account to accurately represent the cash position of the company.

Adjusting the books in this manner ensures that the financial statements accurately reflect the company's assets. The company's cash balance must show only the funds that are actually available, which is now less due to the NSF check. This process is crucial for maintaining accurate and reliable financial records, as any overstatement of cash can lead to misinformed decisions based on inaccurate financial data.