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.
- Why Should You Record Bounced or Returned Checks in QuickBooks?
- How Do You Record a Returned Check in QuickBooks Online?
- How Do I Record a Returned Check in QuickBooks Online using Expense?
- Step 1: Add Returned Check as an Expense
- Step 2: Remove the Returned Check Payment from an Original Invoice
- Step 3: Make a Service Item for the Returned Check Fees from the Bank
- Step 4: Add the Service Fee Your Bank Charged You
- Step 5: Make an Invoice for Returned Check Fees
- Step 6: Send the Statement to the Customer
- How to Record a Returned Check in QuickBooks Desktop Pro?
Why Should You Record Bounced or Returned Checks in QuickBooks?
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.
How Do You Record a Returned Check in QuickBooks Online?
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.
How Do I Record a Returned Check in QuickBooks Online using 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.
Step 1: Add Returned Check as 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.
- Click on the “+New” button.
- Then, select the “Expense” option.
- Switch to the “Payee” field and choose the customer name whose check was bounced.
- Now, using the “Payment Account” drop-down menu, click the account wherein the amount will reach.
- Go to the “Payment Date” field and enter the date when the check was bounced.
- Now, click on the “Category details” drop-down menu.
- Here, you can choose the “Accounts Receivable” from the “Category” field.
- Go to the “Amount” field and add the amount of a returned check.
- Then, move to the “Description” field and add a note such as “NSF check” or “bounced check”.
- Click the “Save and close” button.
As you save the details, the expense is created successfully. This expense will help you to offset the invoice that is unpaid.
Step 2: Remove the Returned Check Payment from an Original Invoice
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.
- Click on the “Invoicing” or “Sales” menu.
- Then, click on the “Customers” tab.
- Now, locate and choose the customer whose check was bounced.
- Here, you are required to choose the record for a returned check.
- After this, go to the “Received payment” screen.
- Here, you can choose and remove the checkmark for an original invoice to which the returned check is attached.
- Once done, click on the checkbox for expenses that you created before.
- Now, click on the “Save and close” button.
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:
- Navigate to the “Invoicing” or ”Sales” menu.
- Then, move to the “Customers” tab.
- Now, find and choose the customer whose check was bounced.
- Here, you can search for your original invoice and place a checkmark for the “Status” column. You should now see the status “Open”.
As you detach the returned check from the original invoice, you can make the invoice and accounting open again.
Step 3: Make a Service Item for the Returned Check Fees from the Bank
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.
- Click on the “Settings” icon.
- From the “Lists” menu, you can click on the “Product and Services” option.
- Now, click on the “New” button.
- From the “Product/Service Information” section, click the “Service” option.
- Add “Bounced Check” in the “Name” field.
- Then, go to the “Income account” drop-down menu and choose the bank account where the check was returned.
- Press the “Save and New” button to create your second item.
- You can name your second item “Bounced Check Fee”.
- Then, add or select the income account named “Bounced Check Fees” using the “Income account” drop-down menu. Alternatively, you can choose the expense account that you use to track the bank charges.
- Once done, click the “Save and close” button.
Now you have created the service item for returned checks and fees, you can add the invoice to send to your customer.
Step 4: Add the Service Fee Your Bank Charged You
Returned checks cause bank charges. If your bank has put you any fees then you should record it too in your account.
- Click the “+New” button.
- Then, choose the “Expense” option from the “Suppliers” section.
- Now, choose your bank using the “Payment Account” drop-down menu.
- From the “Payment date” field, add the date of the returned check.
- Now, go to the “Ref no.” file and add the “NSF Fee”.
- After this, go to the “Category details” and click on the “Bank Charges Expense” account using the drop-down list from the “Account” field.
- Thereafter, switch to the “Amount” column and add the amount that the bank charged for the returned check.
- Once done adding all the details, click the “Save and close” button.
Now, you have entered the fee that your bank charged you. This way you will have a clean record for the charges.
Step 5: Make an Invoice for Returned Check Fees
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.
- Click the “+New” button.
- Then, select the “Invoice” from the “Customers” menu.
- Now, click on the name of a customer.
- Select the date of returned check from the “Invoice date” field.
- From the “Product/Service” column, click the “Bounced check fee” item using the drop-down menu.
- In the “Amount” section, enter the charges for the returned check.
- If you wish to add a note for your customer regarding the note, you can enter it in the “Message on statement” field.
- Press the “Save and Close” button.
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.
Step 6: Send the Statement to the Customer
By sending a statement to your customer, you can summarize what your customer owes you. Let’s prepare the statement in QuickBooks Online.
- Click on the “Invoicing” or “Sales” menu located on the left menu.
- Then, switch to the “Customers” tab and choose the customer’s name who sent the bounced check to open the “Transaction List”.
- Using the “New Transaction” drop-down menu, you can choose the “Statement”.
- Click on the “Statement Type” using the drop-down menu.
- Here, you can set the “Start Date”, Statement Date”, and End Date”.
- Moving ahead to the “Description” column, you can enter the note regarding the second invoice.
- Now, you can hit the “Print” button to create a statement copy. Alternatively, you can press the “Save and send” button.
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.
How to Record a Returned Check in QuickBooks Desktop Pro?
To record bounced/returned check in QuickBooks Desktop Pro, you will have to perform numerous steps. Here are the steps for the same:
- Navigate to the “Customers | Receive Payments” option from the top menu bar.
- Now, locate the customer payment that you received including the returned check.
- Here, you can display the received payment.
- After this, click on the “Record Bounced Check” option from the main menu located at the top.
- Once done, move to the “Manage Bounced Check” screen and add the bank fee amount for the returned check in the “Bank Fee” field.
- Choose the date using the “Data” field drop-down menu.
- Alternatively, you can type the data value into the field directly.
- Now, Click the “Expense Account” drop-down menu to choose the expense account that you use to track the bank fees and service charges.
- In case you turned on the class tracking feature for your company files then you should also click on the “Class” drop-down menu so that you can classify the bank fee.
- In the “Customer Fee” field, you can add the amount that you want to charge your customer for the returned check.
- Select the “Next” button.
- In the next screen with the “Bounced Check Summary” title, you will see a number of various actions that your QuickBooks Desktop will take once you hit the “Finish” button.
- You can note the transactions and click the “Finish” option to continue.
- After that, you can resend the invoice to your customer along with the original invoice. It should also include the new returned check that your QuickBooks account creates.
- Once done, press the “Save & Close” button.
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:
- How to Record Reimbursed Expenses in QuickBooks Online?
- How to Record Expenses Paid by Owner in Quickbooks?
Frequently Asked Question
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.