Returned or bounced check means that the check cannot be processed as the account holder has not sufficient balance. Such checks are usually sent back by the bank due to insufficient funds. Returned checks are also known as NSF checks, rubber checks, bounced checks, bad checks, insufficient checks, etc., which can create huge problems for a person or business. If you are willing to know how a returned check affects your QuickBooks account, we will enlighten you. Here, we will also explain how to record a returned check in QuickBooks Online and QuickBooks Desktop.
In this particular QuickBooks guide, we will teach you about recording bounced or returned checks in QuickBooks Online (using an Expense) and Desktop versions for 2013, 2014, and 2015.
Returned or bounced checks have several effects on the accounting records. It also requires multiple adjustments. Your bank may also charge a fee for returned checks and most businesses prefer to pass through to a customer.
When the check is returned by the bank, your bank balance displayed in QuickBooks is overstated because your check is displayed as a deposit. It is important to adjust the bank balance in QuickBooks so that the right balance can be shown in your account. In addition, you should also show that your customer owes the original invoice and fee you charge for bounced checks.
In QuickBooks Online, returned checks can be recorded in two ways; by using Expense and Journal Entry. Here, we will explain how to record a returned check in QuickBooks 2013/2014/2015 using an Expense.
If you prefer to use the Expense method in order to record the bounced check then you are required to follow a number of steps. First of all, you will have to add the returned check as an expense. Thereafter, you can remove the returned check payment from your original invoice. After that, you can create the item for the returned check and enter the service fee charged by the bank. Once done, you can create the invoice for the returned check fees and send the statement to the customer.
Let’s follow each step to record bounced or returned checks in QuickBooks Online using an Expense.
The first way is to add the returned check by creating the Expense. All you have to do is select the customer, account, date, account category, and enter the returned check amount.
As you save the details, the expense is created successfully. This expense will help you to offset the invoice that is unpaid.
Now, you are required to change the entry of the returned check so that you can prepare an original invoice open. This should be noted that we are not modifying the original invoice; we are only disconnecting a bad payment.
As you have detached the bad check from your original invoice so now you can open the invoice again and apply your accounting. For double-check, you can do the following:
As you detach the returned check from the original invoice, you can make the invoice and accounting open again.
By creating the service item for your fees and returned checks, you can add invoices that can be sent to the customer later. But, you can skip this step if you have already set up the item before.
Now you have created the service item for returned checks and fees, you can add the invoice to send to your customer.
Returned checks cause bank charges. If your bank has put you any fees then you should record it too in your account.
Now, you have entered the fee that your bank charged you. This way you will have a clean record for the charges.
By preparing an invoice for a bounced check, you can send that invoice to the customer that needs to be paid. If you want to charge the customer for a returned check fee then you should create a separate invoice. Remember that you don’t need to edit an original invoice.
Once you enter the date, amount, and note on the invoice for a specific customer, you can send it to them so that your customer can pay the charges.
By sending a statement to your customer, you can summarize what your customer owes you. Let’s prepare the statement in QuickBooks Online.
As you do so, it will create the email to send to your customer including the attachment. Once your customer receives the email, they will know what they owe you and why. By receiving that email, the customer will be aware that there is an open invoice and second invoice in order to cover the bank charges for the returned check.
When your customer pays the charges for the original invoice, you can continue following receiving the payment.
Note: If you want to record a returned check using Journal Entry, the procedure will be the same as Expense. All you have to do is create the item, enter the returned check in Journal Entry, remove the original check and link the bounced check to Journal Entry. Thereafter, you can add the bank fees, create an invoice, and send the statement to your customer. Later, you can receive the payments of your customer for a new invoice.
To record bounced/returned check in QuickBooks Desktop Pro, you will have to perform numerous steps. Here are the steps for the same:
This is how you can enter the returned check along with bank charges for your customer. Once you are done saving the details and sending an invoice to your customer, they can pay it. Later, you can follow the regular steps to receive customer payments.
If the check ever bounces that is sent by your customer, your bank may return the check due to insufficient funds. By recording this returned check in QuickBooks, you can make adjustments and keep your accounting records clear. You can even resend the invoice to your customer so that they can pay the bank charges of their returned checks. Here, we have shown how to record a returned check in QuickBooks Online and Desktop.
To know about recording reimbursement and expenses paid by the owner in QuickBooks, you can visit the following blogs:
In order to record a bounced check in QuickBooks Online, first remove the applied payment from the invoice. This is done from the section of “Customer”. From the same section, you have to choose “New Transaction” as well as “Invoice”. Use these options to record the check as a new invoice.
A returned check is similar to a bounced one. Therefore, you can record it as a bounced check in QuickBooks Online. You will find the “+New” option in the software. Using it, please proceed to “Expense”. This will bring you to “Payee”. Here, you can add the details of the returned check as well as that of the customer.