How to Record Bounced Check in Quickbooks
We received a Question from
"ExpertWandaB" in our Forum Posting
We have a customer whose check bounced for “insufficient funds”
This was discovered after receiving a bank statement and reconciling our records.
How do you properly record this problem so that it can be reconciled a bank statement?
Also, how do you indicate a credit for payment to the customer when the bank finally clears a bounced check?
Thanks in advance.
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OUR RESPONSE
Create a chart of accounts called "Bounced Checks" as an Accounts Receivable.
Make journal entries from bank account to this new account to record money going out and coming back in.
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My question about this NSF procedure has to do with the Customer Register. If the check that bounced was a rent check that had been paid against an Invoice for Rent your procedure doesn’t accurately reflect the reality of what occurred.
I don’t know if it’s right but what I’ve done is a Journal Entry: DR the checking account and CR Tenant Rents. Then I write another Customer Invoice for the month’s rent (noting they had a NSF on 1st pmt, adding NSF fees and Bounced Check Charges). When the tenant makes good the rent payment it is paid against the 2nd invoice.
Is there something wrong with this method?
Hello Frank
It is fine, there is an easier way but yours will work.
You have to set up an item for returned checks mapping it to your bank account the check was deposited to, maybe one for each bank if multiples are used. Add an item for returned check fees, also mapping it to your bank account on the same invoice.
That will automatically put the charge back on your checking account for both the check and the fees and show as A/R for your client. However, the charge will be for the returned check not for Rent so if you need it to show Rent owed your method is better. Either way your customer will show a balance due.