How to Record a NSF or Bounced Check in QuickBooks

Written by admin on May 23, 2013

bounced check in quickbooksAccounting for an NSF check in QuickBooks becomes part of the responsibility of using the QuickBooks software. Although there may be different names for this type of transaction, such as an NSF check or a bounced check, accounting for the transaction is still the same.

Below are instructions on how to account for an NSF check in QuickBooks.  A POS system can be used to collect a payment when a business owner clicks on the “Take Payment” button that is usually located at the bottom of a window that is used for a New Sales Receipt. This step may be taken by a customer in order to exchange a bad check at any chain store. The POS system then transmits this information to the QuickBooks software program to update the customer’s account.

There are two methods to account for an NSF check in QuickBooks. However, both methods start by creating a new invoice to the customer for the amount of the original check, plus any additional fees that your store adds. Business owners then account for any fees that the bank has charged your company by using one general journal entry as one method. The other method consists of using one general journal entry to account for all payments related to the returned check.

For the first method, create two new Items. These will be listed under the Other Charge Items under the Items List. Business owners may wish to name the first Other Charge Item “Returned Check.” Business owners must set up the charge to be associated with the bank account where the original check was deposited.  The second charge will be for other bank charges. Both charges should have a non-taxable Tax Code. The second charge may be set to $0.00, or you may opt to fill in an amount that you charge every customer for a returned check. The second charge is created as an “Other Income Account.”

Next, business owners must create a general journal entry to account for the amount that the bank charged your business and that it deducted from the bank account where the check was deposited. Click on the Company/Make General Journal Entries selection to get to the related area in QuickBooks. Input the bank charge, which is a credit to the account and a debit to expenses. Then, make a new invoice to the customer so that the customer receives a new invoice for the amount of the returned check and the fee that your company charges.

The second method involves making one general journal entry by clicking on the Company/Make General Journal Entries selection. Business owners then make a debit of the entire amount to the customer’s Name field, adding a credit to the bank account for the insufficient check, adding a credit to the bank account item to reduce the bank balance, adding a debit of the bank service charges, and adding a credit to record the revenue.

If you need assistance with accounting for an NSF check in QuickBooks or any other matter related to QuickBooks, contact our QuickBooks ProAdvisor in your area.