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How to enter a bounced check using a journal entry

Learn how to record Non-Sufficient Funds (NSF) or bounced checks in QuickBooks Online.

When you receive NSF check from customers you can create a journal entry to reflect the non-payment. You can record all related details on a bounced check transaction by following the outlined steps.

Check out this guide to know the other ways to record bounced checks.

Create an Item for bounced checks.

Warning: This item only needs to be set up once. If you’ve done this before, proceed to Step 1.
  1. Select the Gear icon, then select Products and Services under Lists.
  2. Select New, then choose Service.
  3. Name the item Bounced Check Fees.
  4. Select an account you use to track bounced check fees from the Income account drop-down list.Note: You can also use an expense account you use for tracking bounced check fees.
  5. Select Save and close.

Step 1: Record the bounced check in a journal entry

The first step is to record the bounced check in a journal entry:

  1. Select + New.
  2. Under Other, select Journal Entry.
  3. Enter the date the check bounced in the Journal date field.
  4. On the first line, select Accounts Receivable from the Account menu.
  5. In the Debits column, enter the amount of the bounced check.
  6. Select the customer from the menu in the Name column.
  7. On the second line, select the bank account from the Account menu.The amount should appear automatically in the Credits field.
  8. Enter a notation explaining the reason for the journal entry in the Memo field.
  9. Select Save.

The bounced check is recorded. The next step is to clear the invoice that was paid with the bounced check, and link the bounced check to the journal entry you created.

 

Step 2: Clear the original invoice and link the bounced check to the journal entry

You must clear the original invoice, paid with the bounced check, and link the returned check to the journal entry:

  1. From the left menu, select Sales or Invoicing.Options on the left menu vary based on company setup.
  2. On the Customers tab, select the name of the customer who issued the bounced check to open the Transaction List.
  3. Locate and select the bounced check.
  4. Clear the checkbox of the invoice the check was originally applied to, and select the Journal Entry.
  5. Select Save

    Step 3: Enter the bank service fee for the bounced check

    Enter the bank service fee for the bounced check as an expense:

    1. Select + New.
    2. Under Vendors, select Expense.
    3. In the Payee field, enter your Financial Institution's name.
    4. In the Payment date field, enter the date the check bounced.
    5. Enter NSF fee in the Ref no. field.
    6. On the first line, under Category, select the Bank Charges expense account.
    7. Enter the amount your bank charged you for the bounced check in the Amount column.
    8. Select Save.

    The fee is recorded. The next step is to create Service items for bounced checks and fees to use in recording these charges.

    Step 4: Create an invoice for the bank service fee

    You must create an invoice for the bank service fee:

    1. Select + New.
    2. Under Customers, choose Invoice.
    3. Select the Customer name and enter the date the check bounced in the Invoice date field.
    4. In the Product/Service column, select the Bounced check fee item you created from the drop-down list.
    5. Enter the Amount to charge the customer for the bounced check.
    6. Select Save and Close.

    The invoice for the bounced check fee is created. The next step is to send a statement to the customer regarding the bounced check and fees.

    Step 5: Print a statement to send to the customer

    To print a statement to send to your customer regarding the bounced check fees:

    1. From the left menu, select Sales or Invoicing.
    2. On the Customers tab, select the name of the customer who issued the bounced check to open the Transaction List.
    3. The next step is to create Service items for bounced checks and fees to use in recording these charges.
    4. Select the Statement Type to create from the drop-down list.
    5. Set the Statement Date, Start Date, and End Date.
    6. Select the checkbox beside the recipients name.
    7. Select Print to generate a copy of the statement, or select Save and send to create an email to send to the customer with the statement attached.

    The statement is generated for the customer. When the payment is received, the next step is to record the new payment.

    Step 6: Receive the customer's payment for the new invoice

    When you receive payment from the customer, you can apply to the new invoice:

    1. Select + New.
    2. Under Customers, choose Receive Payment.
    3. Select the customer from the Customer drop-down list.
    4. Enter the Payment date and Payment method for the new payment.
    5. Select the Deposit to account from the drop-down list.
    6. Enter the Amount received.
    7. Select the invoice you created from the Outstanding Transactions list.
    8. Select Save and Close.

    The payment is recorded.

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