How do I record a bounced check so that it zeros out the initial expense that was paid by this check?

Thanks for reaching out to the Community, dlm0502.
 

If a check you wrote bounces, it's because your account has non-sufficient funds (NSF), or doesn't have enough money to cover the check amount. When this occurs, your bank charges you an NSF or bank fee. How you plan to handle these fees includes how to handle the accounting side of things.
 

Here's what to do if your check bounced, but the financial institution covered it and charged you a bank fee:
 

1. Use your + New button, then go to Expense.
2. From the Payee ▼ drop-down list, choose a vendor if your bank charged it to them, or specify the financial institution if they charged it to your account.
3. In the Payment account ▼ drop-down, pick your account used to pay expenses.
4. To distinguish it from other expenses, enter "NSF fee" in the Ref no. field.
5. Under your Category column, click choose Bank Charges.
6. Enter the amount you were charged for.
7. Select Save.

If your check bounced, the financial institution didn't cover it, and your vendor returned the check without redepositing it, or your check bounced, the bank didn't cover it, and your vendor keeps redepositing the check, review your additional scenarios in our What to do if your check bounces and your bank account has non-sufficient funds article.
 

I'll be here to help if there's any additional questions. Have an awesome Thursday!

This does not help me.  There are no fees to worry about.  I need to know how to offset the bounced check against the paid expense so they zero each other out.

I appreciate you for adding extra detail to your concern, dlm0502.

I've got options for you on how to offset a bounced check in QuickBooks Online. Let's start by creating a Journal entry(JE) to reverse the bounced check payment and unlink the bill.

Next, link the original bill to your newly created JE and create a new bill so you'll only have a single expense transaction. Allow me to guide you through the steps below, ensuring a smoother process:

1. Go to the + New button.
2. Select Journal Entry.
3. Enter the date the check bounced in the Journal Date field.
4. On the first line, select the bank account from the dropdown menu in the Account column.
5. Type the check amount in the Debits column.
6. On the second line, select Accounts Payable from the dropdown menu in the Account column. The check amount populates.
7. From the Name column, select the vendor.
8. In the Memo field, enter a note of why you created the journal entry.
9. Hit Save.

Next, re-open the bill and link the bounced check to the journal entry.

1. Navigate to Expenses.
2. Click Vendors and select the name of the vendor.
3. In the Transaction List, find the bounced check.
4. Uncheck the checkbox for the bill, then choose the one for the journal entry.
5. Confirm you want to make the changes.
6. Hit Save.

Once done, refer to this article and navigate to the If your bank records every bounce and reversal option for the complete guide to these steps: Handling Bounced Check in QuickBooks Online. 

The Community is always open if you need further help managing your checks. Feel free to reach us back again. Have a good one. 

This is still not helping me.  There is no bill to unlink from the payment.  The expense came in through my bank feed.  There was no bill to link it to so it just gets categorized as an expense.  So, as I said, I now have 2 expenses and an open "deposit"-which is the bounced check.  I need to know how to zero out the first expense transaction and the deposit (bounced check).  There are no bank fees and no bills.

Hello, dlm0502.

You mentioned that a check bounced back in the bank feed and is now coded as a returned item in AP. As a result, your books show a paid expense and an open deposit owed to the vendor. I have another suggestion to help you zero out the expense. First, I recommend undoing the deposit coded to AP. After that, we can categorize and add the same bank and expense to offset the check bounce and expense. This should fix the current situation.

To undo the deposit, here's how:

1. Click the Transactions, and select Bank Transactions.
2. Under the Categorized Tab, choose the deposit and Undo it.
3. Then, from the For Review tab, Categorize the transaction and enter the same bank and expense info. Then click Add.

Once you have completed the above steps, you can re-deposit the check. This will enable you to pay the vendor you owe. To do this, you can write a check back to the vendor with the same expense and bank information. Here are the steps you can follow:

1. Click the + New, then select Check.
2. Enter the information with the same expense and bank info.
3. Tap Save and close.

For your reference, check the bank rules feature to help categorize your transactions automatically. Please check out this article: Set up bank rules to categorize online banking transactions in QuickBooks Online. Additionally, here's an article that you can read to help track where your company stands regarding expenses and accounts payable: Common custom reports.

If you require any assistance with this process, please do not hesitate to let me know. I'm more than happy to lend an extra hand. Have a great day!