Record a bounced cheque using an invoice in QuickBooks Online

Learn how to record a bounced cheque using an invoice in QuickBooks Online.

Did the cheque from your customer bounce? Don’t worry. There are different ways you can record a bounced cheque in QuickBooks. However, one of the easiest ways is to use an invoice. Follow these steps to record the bounced cheque and maintain the accuracy of your books.

You can also learn what to do if your own cheque bounces.

Important: When you use this method, your Customer Detail report will overstate the amount of the bounced cheque. Unlike the Profit and Loss report, the Sales by Customer Detail report shows all sales, regardless of whether the sale involves an income account.

Step 1: Create two service items

Create an item to reverse the payment

You need to create a new service item and link it to your bank account instead of an income account. When you use it on an invoice, it reverses the cheque in your bank register.

1. Go to Settings ⚙, then select Products and services.
2. Select New, then select Service.
3. In the Name field, enter 'Bounced cheque'.
4. From the Income account ▼ dropdown, select the bank account you used to receive the bounced cheque.
5. Select Save and close.

Create an item to track bank service charges

1. Go to Settings ⚙, then select Products and services.
2. Select New, then select Service.
3. In the Name field, enter 'Bounced cheque fees'.
4. From the Income account ▼ dropdown, select or add the income account 'Bounced cheque fees'. Or, select an expense account you use to track bank charges.
5. Select Save and close.

Step 2: Create an invoice for the bounced cheque and fee

1. Go to + New, then select Invoice.
2. From the Customer ▼ dropdown, select the name of the customer who wrote the bounced cheque.
3. Select the Invoice date field, then enter the date the cheque bounced.
4. From the Product/Service ▼ dropdown, select the item Bounced cheque.
5. Enter the amount of the bounced cheque in the Amount field.
6. Select another Product/Service ▼ dropdown, then select the item Bounced cheque fees.
7. Enter the amount to charge the customer for the bounced cheque in the Amount field.
8. Select Save and close.

Step 3: Record the bank’s bounced cheque fees

1. Go to + New, then select Expense.
2. From the Payment account ▼ dropdown, select the bank account you used to record the bounced cheque.
3. Select the Payment date field, then enter the date the cheque bounced.
4. In the Ref no. field, enter 'Bounced cheque fees'.
5. From the Category ▼ dropdown, select the income account 'Bounced cheque fees' or the expense account you use to track bank charges.
   Important: Make sure you select the same account you used for the 'Bounced Cheque Fees' item you created.
6. Enter the amount your bank charged you for the bounced cheque in the Amount field.
7. Select Save and close.

Step 4: Record the payment from your customer

1. Go to + New, then select Receive payment.
2. From the Customer ▼ dropdown, select the customer who paid using the bounced cheque.
3. Enter the Payment date and Payment method for the new payment.
4. From the Deposit to ▼ dropdown, select the same bank account you used to receive the bounced cheque.
5. Select the invoice you created from the Outstanding Transactions list, then enter the amount you received in the Payment field.
6. Select Save and close.