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Super Explorer ***

How to record Journal entry for returned check to vendor?

I paid a vendor for work done. Because we connect our bank feed to QB, and because we pay vendors through online billpay, when we send the check online, the transaction shows in the QB banking feed before the check actually arrives and the vendor deposits to his bank. So the bank transaction was matched to the bill payment.

 

Later on, after the month of the original bill payment was already reconciled, the money was returned to our bank account bc the vendor never received the check.


We then reissued the payment which has since been deposited.

 

The question is how to account for all of this without messing up the reconciled original bill pay.

 

I tried creating a Journal entry where we:

 

FOR THE RETURNED CHECK

1) Credit accounts payable

2) Debit Bank account

 

FOR THE REISSUED CHECK:

1) Debit Accounts Payable

3) Credit Bank account

 

I then match the two respective transactions in the bank feed to these journal entires.

 

All seemed OK and A/P showed no net change, but when I go to the vendor transaction detail list, even though the "open balance" shows zero, the "overdue" amount shows $600 which was the amount for the payment in question. Not sure how since:

1) Bill payment that was returned was kept as it was so 600 paid

2) We then deposited 600 in the bank and sent 600 again


The last 2 transactions should net out. And in both cases we put the vendor's name on the A/P side of the journal transaction. 

 

Any ideas why the overdue is showing 600?

Solved
Best answer 01-25-2019

Accepted Solutions
Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@haskenazi1 wrote:

 

 

All seemed OK and A/P showed no net change, but when I go to the vendor transaction detail list, even though the "open balance" shows zero, the "overdue" amount shows $600 

 

Any ideas why the overdue is showing 600?


Yes, all you need to do is apply the open amounts to each other, with a zero Expense transaction. Create an Expense and when you select the vendor, 2 transactions should appear in the right drawer, one positive and the other negative for the same amount. Add them both, and the total s/be zero. Date it on the date of the re-issue. Save.

20 Comments
QuickBooks Team

Re: How to record Journal entry for returned check to vendor?

Hello there, haskenazi1.

 

I appreciate you providing details. Let's work together to correct your recording in QuickBooks Online.

 

Good job in creating the Journal Entry. Next, you will have to un-link the bill from the payment check and link it to the journal entry:

  1. Open the original bill payment check.
  2. Uncheck the bill originally paid by the bill payment check.
  3. Check the Journal Entry created.
  4. You can enter a memo.
  5. Select Save & Close.

Lastly, let's create a new bill payment check. Since you un-link the original bill payment check from the bill, they were marked unpaid and should re-appear in the Pay Bills window.

  1. Click the Plus icon.
  2. Select Pay Bills.
  3. Select the bill originally paid.
  4. Complete all other required information.
  5. Click Save and close.

I also advise reaching out to your accountant who can tell you which process would be better for your specific books.

 

That should close the $600 transaction, haskenazi1.

 

I'm still here to help you more if you have additional inquiry. Just click the "Reply" button or mention my name. Have a good one.

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@HoneyLynn_G wrote:

 

Lastly, let's create a new bill payment check. 

 


Your suggestion to create a new check would create an error.  There have already been 2 payments created, first with the original payment then the re-issued payment with a JE as the asker clearly showed

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@haskenazi1 wrote:

 

 

All seemed OK and A/P showed no net change, but when I go to the vendor transaction detail list, even though the "open balance" shows zero, the "overdue" amount shows $600 

 

Any ideas why the overdue is showing 600?


Yes, all you need to do is apply the open amounts to each other, with a zero Expense transaction. Create an Expense and when you select the vendor, 2 transactions should appear in the right drawer, one positive and the other negative for the same amount. Add them both, and the total s/be zero. Date it on the date of the re-issue. Save.

Super Explorer ***

Re: How to record Journal entry for returned check to vendor?

Thanks - wondering if this is necessary, however, because I went a different route altogether and seems to work:

 

1) Instead of choose accounts payable for the journal entry, I created an expense account (or possible a COGS) called "returned vendor checks". 

2) I then create the journal entry like I did in the original post, but used this Returned Vendor Checks account for the credit return deposit, and the reissued check. That seems to get everything straight. I never void the original bill payment bc it was reconciled already. Rather, I just added a note referencing the issue and the journal entries into the bill payment screen

 

Note: The only thing I'm confused about with this solution is why the journal entries dont show in the vendor transaction detail list even though the vendor was tagged to the entries.

 

Follow up question:

In the Journal Entry, I chose the vendor's name for the Returned Vendor Checks line, but not for the Bank line. I did this for both the returned check and the reissued check. What affect would adding the vendor to the bank like have, if any?

 

 

Super Explorer ***

Re: How to record Journal entry for returned check to vendor?


@Malcolm Ziman wrote:

@haskenazi1 wrote:

 

 

All seemed OK and A/P showed no net change, but when I go to the vendor transaction detail list, even though the "open balance" shows zero, the "overdue" amount shows $600 

 

Any ideas why the overdue is showing 600?


Yes, all you need to do is apply the open amounts to each other, with a zero Expense transaction.

What are the two open amounts you are referring to? I'm not clear on why any amount was open since until the check was returned, there was nothing open. Then when it was returned and reissued, I created 2 offsetting JEs instead of voided the original payment. In fact, the Vendor Transaction list showed zero open. However, it showed $600 overdue. Intuitively, how can nothing be open but overdue simultaneously? Unless I'm not understanding the terminology being used (entirely likely).

 

Create an Expense and when you select the vendor, 2 transactions should appear in the right drawer, one positive and the other negative for the same amount. Add them both, and the total s/be zero. Date it on the date of the re-issue. Save.

 

Can you explain the logic behind this? Goes back to my original point above where I am missing why there is anything overdue in the first place if nothing is open.

BTW, should I be considering voiding the first payment that was returned, despite it already having been reconciled? Then replacing that payment w a JE? 


 

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@haskenazi1 wrote:


"What are the two open amounts "

The AP postings in the 2 JEs 

 

"Can you explain the logic behind this? Goes back to my original point above where I am missing why there is anything overdue in the first place if nothing is open."

Open (unapplied) credits are not included in the calculation of Overdue amount. Not sure why. They just aren't

 

" should I be considering voiding the first payment that was returned, despite it already having been reconciled? Then replacing that payment w a JE"

No, what you did originally was fine.  Don't change or add anything. In fact your books are correct; both the AP and bank balances are correct.  Creating a zero Expense as I explained just closes the Overdue balance; it does not change any balances in the Balance Sheet; the behind the scenes posting is debit AP, credit AP with the same amount.  It's an unapplied amount that just needs to be applied, so that the Aging report is right, and the Overdue amount on the vendor card does not show an amount.  It does not change the important balance; the Open balance

 

 

" wondering if this is necessary, however, because I went a different route altogether and seems to work:"

I did not follow this. It's unnecessary

No, what you did originally was fine.  Don't change or add anything. In fact your books are correct

 

 

Super Explorer ***

Re: How to record Journal entry for returned check to vendor?

Thanks for your help - it worked and I understand why. 

Follow up question:

Why do some transactions (in this case, the zero expense I created) not show in the transaction list for the vendor? Say I wanted to look back at that record, and I only remember it was for a specific vendor. I'd be unable to locate that expense via the vendor transaction list which seems odd.

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@haskenazi1 wrote:

 

Why do some transactions (in this case, the zero expense I created) not show in the transaction list for the vendor? 


It does show. It changes the transaction type to a Bill Payment

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?

All of this is Too Much Work. Let's review:

The Replacement payment is Not the expense, again.

 

Like this:

You Paid. It didn't get there = Banking issue. Not Expense or AP.

 

For Banking, make a Deposit entry for this amount and put it to an Other Current Liability account = not yours to keep. Now send the Replacement as paying out that Other Current Liability.

 

It's not More expense, it's not AP, and you don't want it to be part of 1099-Misc reporting. It isn't P&L, either.

 

The original Bill Payment entry and your placeholder deposit Clear against each other next reconciliation to Net 0 = No Impact. The New, replacement, payment is part of the next round of Banking.

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@qbteachmt wrote:

 

 

For Banking, make a Deposit entry for this amount and put it to an Other Current Liability account = not yours to keep.

 

 


No don't make any more entries. That would create an error

What asker did originally was fine.  Don't change or add anything. In fact the books are correct; both the AP and bank balances are correct.  

Just need to apply the debit to the credit. That's all

 

Note that asker stated 2 days ago that my solution was followed and the problem is resolved

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?

I never understand why people make things This Hard. It is a simple banking entry, to offset the returned check and reissue it, and none of this is AP or more expense. It's Banking.

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?


@qbteachmt wrote:

none of this is AP or more expense


No expense was created, and actually it is AP, between the date that the money was returned to their bank account, and the date a check was re-issued

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?

@Malcolm Ziman

Let's review:

 

"and actually it is AP, between the date that the money was returned to their bank account, and the date a check was re-issued"

 

I paid your costs in Dec. The Check didn't get there, so I need to send a Replacement Check or give you money. That is not the same expense, as last year. I already paid you last year. That is last year's expense. I am replacing the Money. I already paid you and your bill. Now, this is Banking. I ended up not having the Cash Flow, so my Liability is to replace that check with a new check or money.

Established Community Backer ***

Re: How to record Journal entry for returned check to vendor?

 

 


@qbteachmt wrote:

my Liability is to replace that check with a new check or money.


Yes it is a Liability

AP is a type of Liability

 

You stated earlier "none of this is AP". This is an incorrect statement

 

It is AP, between the date that the money was returned to their bank account, and the date a check was re-issued

 

Frequent Explorer *

Re: How to record Journal entry for returned check to vendor?

Hello I have the same issue but using QBO sync with Bill.com and need help. 

 

We always using Bill.com in making payment to the vendor and it will be synced to QBO. 

Once, we got a bounce back check from the vendor and this what happened: 

1. The money came back to the bill.com and the invoice in the bill.com automatically open for payment again.

2. In QBO, the money came back to the bank and we have to journal it against the money clearing Bill.com. 

3. In QBO, the invoice which the check bounce back still recorded as paid. How do make this invoice open again in the QBO? 

 

Thank You so much

 

QuickBooks Team

Re: How to record Journal entry for returned check to vendor?

Hi there, Jayfong1.

 

Thanks for joining the thread. I'd be happy to help you make the bill open again.

 

I appreciate you taking the time to share the steps that you took. With this, I can see that you're already on the right track. We just need to add a few more steps which involve the journal entry that you made to reopen the bill.

 

To give you an overview, we'll actually unlink the bill payment and link it to the entry. The steps below will guide you through the process:

Unlink the bill from the payment check and link it to the journal entry

  1. Click Expenses in the left navigation menu.
  2. In the Expenses tab, select the Bill Payment.
  3. Uncheck the bill(s) originally paid by the bill payment check.
  4. Check the Journal Entry you created.
  5. Enter a Memo to indicate the check was returned for NSF.
  6. Select Save & Close.

For additional insight about this, I recommend following this article: Manage a bounced check you wrote

 

That should do it. With these resources, I'm confident that you'll be all set with your vendor bills in no time!

 

Keep in touch should you need more assistance with this. I've got your back and am always happy to help. Have a great day.

Frequent Explorer *

Re: How to record Journal entry for returned check to vendor?

Hi Aldrin, 

Thank you so much for your help! 

Really appreciate it.

QuickBooks Team

Re: How to record Journal entry for returned check to vendor?

Good to hear from you again, Jayfong1.

 

You're most welcome and I also appreciate you taking the time to post this and letting me know.

 

As always, the Community is full of experts possessing knowledge in all facets of QuickBooks, so please reach out to us here if there's anything you need. We're always happy to help you along your road to victory. Wishing you and your business continued success!

Senior Explorer *

Re: How to record Journal entry for returned check to vendor?

How about a down and dirty way to deal with this? Change the check number of the first check to that of the second check. And then ignore all the other bank feed entries. 

Super Explorer *

Re: How to record Journal entry for returned check to vendor?

Thanks Malcolm, I had exactly the same issue and your solution worked great. But I have a follow-on question if you have a minute.

 

So when you create the Expense transaction -- I'm going to refer to it as the join-them-together transaction -- even though it is for an amount of zero, still you have to provide a value for the Payment account field. I just entered the Bank account from which I'd issued the original and subsequent payments, and that seemed to do the job, but I was curious when I noticed that no new transaction appeared in that account, despite the fact that I had just created one, albeit zero-valued. Not that there should have been one from the accounting/arithmetic point of view, but still it was surprising and as I said made me curious.[1]

 

So I decided to explore a bit to see what was going on. First. I went back into my join-them-together transaction to have a look and was surprised to find that the Payment account field was now empty. Curiouser and curiouser. So next I tried putting a different account in there -- one completely unrelated to the returned-and-reissued check situation -- and it seemed to be just as effective in making the join-them-together transaction work. Finally, just like the first time, when I went back into the join-them-together transaction, the Payment account field was empty again!

 

So it seems like for these join-them-together type transactions, it really doesn't matter what you put into the Payment account field, as long as you put something. The one thing that's not allowed is to put *nothing* into that field (although that's despite the fact that when you look back into the transaction, nothing is precisely what you then find in the field).

 

Oh, I said I had a question! Well, does the above make sense? Am I right about the Payment account field not mattering for these join-them-together transactions?

 

thanks!

 

[1] Just to be clear, even though no new transaction appeared in the bank, one did indeed appear in the Vendor transaction list. It was the lack of the former that was puzzling me.