There are two options available in QuickBooks Desktop for recording checks that are returned due to lack of funds in a customer's account also known as bounced checks. Option 1 works ONLY if you are in Single-user mode. If you need to record bounced checks while in Multi-user mode, you need to follow Option 2 for manually recording NSF.

Option 1: Use the Record Bounced Check feature

IMPORTANT

The Record Bounced Check feature only applies to Check payments. If you have a returned ACH item, change the payment type to check then follow these instructions. If the Record Bounced Check icon remains grayed out, or if you are unable to follow these steps due to the payment type being grayed out, please follow steps in Option 2 to manually record the bounced check.

  1. From the QuickBooks Customers menu, select Customer Center.
  2. Go to the Transactions tab, then select Received Payments.
  3. Double click the payment you want to record as NSF.
  4. On the Receive Payments window, select the Record Bounced Check icon on the Main ribbon tab. Note that the check must not be waiting to be cleared in the Undeposited Funds account, as it would have to have cleared the bank in order to bounce.
  5. In the Manage Bounced Check window, enter the following information, then select Next.
    • Bank Fee and Date
    • Expense Account for the Bank Fee
    • Class
    • Customer Fee (how much you charged the customer)
      NOTE: All these fields are optional. You can leave them blank if you didn't incur any charge or if you do not want to charge the customer for the NSF check.
  6. QuickBooks will show you the Bounced Check Summary, for you to know what happened behind the scenes.
    For example, you may see:
    • The following invoices will be marked unpaid
    • The following fees will be deducted from your bank account
    • This invoice will be created for the fee you want to charge your customer.
  7. Select Finish.
  8. You will then see a Bounced Check indicator on the customers payment letting you know you just used the bounced check feature on that payment.
  9. QuickBooks creates a journal entry debiting your accounts receivable account and crediting your bank account. The original invoice is marked unpaid, so you can re-invoice the customer.

Option 2: Manually record bounced check

Follow these steps if you need to record bounced checks while you are in multi-user mode:

Step 1: Create an account and an item for tracking NSF checks

  1. Create an account.
    1. From the Lists menu, select Chart of Accounts.
    2. Right click anywhere in the Chart of Accounts, then select New.
    3. In the Add New Account window, select Income, then select Continue.
    4. In the Account Name field, enter Bounced Checks Income.
    5. Select Save & Close.

     

  2. Create an item for the NSF fee your bank may charge you.
    1. From the Lists menu, select Item List.
    2. Right click anywhere in the Item List window, then select New.
    3. On the Type drop-down, select Other Charge.
    4. In Item Name/Number field, enter Bad Check Charge.
    5. From the Tax Code drop-down arrow, select a non-taxable code.
    6. Select the Bounced Checks Income (created in step 1. a.) as the account for this item.

Step 2: (Optional) Record the NSF fee from your bank

  1. From the Company menu, select Make General Journal Entries.
  2. On the Make General Journal Entries window, debit your bank service charge expense account for the amount your bank charged you for the NSF check.
  3. In the Memo column, enter a note describing the transaction.
    Example: "NSF check #226 from Mr. Emory."
  4. Credit your checking or bank account for the amount of NSF charge.

Step 3: Reverse the original payment

  1. Create a journal entry.User-added image
    1. From the Company menu, select Make General Journal Entries.
    2. In the Make General Journal Entries window, debit your accounts receivable account for the amount of the NSF check.
    3. In the Memo column, enter a note describing the transaction.
      Example: "NSF check #226 from Mr. Emory."
    4. In the Name column, select the name of the customer or job associated with the NSF check.
    5. Credit the checking or bank account that received the original deposit.
    6. Select Save & Close.
  2. Move the payment from the invoice to the reversing journal entry.User-added image
    1. From the Reports menu, select Customers & Receivables, select Customer Balance Detail.
    2. Double-click (QuickZoom) the original payment line for the NSF transaction.
    3. In the Receive Payments window, move the checkmark from the invoice to the reversing journal entry.
    4. Select Save & Close.

Step 4: (Optional) Charge your customer for the bank NSF fee

  1. From the Customers menu, select Create Invoices.
  2. Create an invoice for the customer who wrote the NSF check.
  3. In the Item field, select Bad Check Charge item created in Step 1.
  4. Enter the amount of the NSF charge assessed by your bank plus any markup.
  5. Select Save & Close.

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