Accounting for cancelled checks

I appreciate your time posting here in the Community, SueTy.

To answer your first question , I suggest consulting your accountant before removing the adjustments made. This is to ensure that it will not affect your accounts and financial reports in QuickBooks. There are different ways to record a bounced check in QuickBooks Online (QBO). You can either use an invoice, expense, or journal entry. You can check these articles for the detailed steps and instructions to record a bounced check using the following methods:

• Record a bounced check using an invoice
• Record a returned or bounced check customer check using an expense
• Record a returned or bounced customer check using a journal entry

Please know that you're always welcome to post if you have any other concerns. Wishing you and your business continued success.

Hi TirzahC,

Thank you for getting back to me, and also for the advice to consult an accountant re: the reconciliation adjustment I made. I appreciate it!

For my main question, though, which is what the screen captures were about: I'm a bit confused, because these checks aren't bouncing. The recipients of the refund checks are failing to cash them within 90 days, so the money is returned to our checking account (when the checks initially go out, they're recorded as expenses; when they come back in, I'm not sure how to properly account for these deposits).

As mentioned, I was advised to put the funds from the returned checks into Reimbursements. But, in the example I screen-captured, in one case, the refund was paid out of the account for one of our chapters, and the reimbursement is not showing on the chapter's expense report to cancel out this expense. So, in other words, it looks like the refund went out, but the funds from the cancelled check never came back in, so it's still reading as an expense in the chapter report.

I was wondering if you could help me solve that particular problem. Any advice you could give me would be deeply appreciated -- thank you! I'm re-attaching the file I sent yesterday to make life easier.

Hello, SueTy.

Thanks for replying to us. Since the refund didn't go through, you can void the check. This way, the check will remove as an expense. Then you can add a note for what this void check is for. 

Once done voiding the check, you'll have to manually process the refund and enter them into QuickBooks Online. You can click this article to see the detailed steps on how to perform the process: Void or refund customer payments in QuickBooks Online.

If you're unsure, reach out to your accountant. This can get tricky and they know how to handle the next steps. Don't have an accountant? We can help you find one. 

I'm always here if you need more help in refund your transaction. Just let me know by leaving a reply below. Keep safe and have a wonderful day!

Hi AileneA,

Thanks for getting back to me! I think my inexperience is possibly confusing the issue, which has to do checks, not credit cards.

In a nutshell:

• We sent a check to a member in March 2020 and recorded it as an expense (it was for an award). Wells Fargo deducted this money from our checking account in the March statement.
• She held onto the check for 90 days, so it was cancelled by Wells Fargo in June 2020, at which point, Wells Fargo deposited the money back into our checking account.
• So, in effect, no money actually ended up moving anywhere, except in Wells Fargo's checking account. 
• But, the expense is still showing up in the  member's chapter statement

So, what I need to find out is: How do I indicate in this chapter statement that the money was actually not spent? How do I get this expense off the books, since no money was actually spent and the check was cancelled?

One person is telling me I need to do a journal entry for this. Can you walk me through that, or is there another way I can get this phony expense to disappear, since it wasn't paid out?

Thank you again -- and, sorry if I'm not putting things the right way. It does seem so cumbersome in this system to take care of checks that a bank has cancelled because they weren't cashed in 90 days! I wish there were clear-cut steps to take that were in the QB help, because this happens fairly often, I'd think!

Hi BettyJaneB,

Thank you so much -- to you, @AileneA and @TirzahC  -- for all your help! @BettyJaneB, I did something along the lines of what you suggested with my reimbursement: prompted by what you wrote, I changed the account for the cancelled check funds to go into from Reimbursement to the account it was written out of, and now the amounts cancel each other out in the Profit and Loss report. 

I learned a lot from each of you and really appreciate everyone's time. Thanks so much again!!