Established Community Backer ***
This widget could not be displayed.

Re: "When I enter the donations by Donation (Sales Receipt),...

To enter a Reversal of a Sale (Sales Receive/Donation or Invoice/Pledge), you use your donation item on a Credit Memo.

 

Then, you either apply that to the unpaid open invoice; or, you use it to Refund the money from the Credit Memo, directly. That isn't a real refund, of course, to reflect a Bounced Check. It simply is a posting to banking to reflect the lost amount from the initial deposit that is too high or reflects the return of the funds when the bank pulled back the bounce. It's your Banking Bookkeeping entry, not a check to send the funds anywhere, in reality.