A QuickBooks client asked: When you receive an NSF check, the recommended method is to reissue the invoice plus any NFS charges. Does this also correct your accounts receivable detail?
The answer is yes, it does. Unfortunately, most companies will eventually deal with one or more bounced checks. New users follow Intuit’s method found on the QuickBooks help screen, which can be difficult to understand, so I’ve attempted to simplify it.
1. Leave the original receive payment and deposit transaction as is because payment was actually received and deposited.
2. Immediately reduce your checking account for the amount the bank charged for the bounced check by using "write checks" or enter directly into the bank account register. The payee name is up to you, but code to the account "bank charges" and enter the customer name in the customer/job field.
You will record a new receivable invoice or statement charge for the amount the customer owes to you (the bounced check, the bank fee and your own fee if applicable*). This new invoice or statement charge will put a charge in the bank register thus reducing the bank account amount by the amount of the bounced check.
On the new invoice:
• The first line item is "Bounced check” (set up as an “other charge” item, coded to the bank account).
• The description should be “Bounced or Returned Check”. You may want to also manually enter the customer’s check number in the description field.
• The first line amount is the original/bounced check.
When this invoice is paid, the A/R will be reduced, the bank register will be increased, and MOST IMPORTANTLY, you have NOT recorded a new sale for this specific charge.
On the new invoice:
• Enter a second line item called "bounced check bank fee" for the amount your bank charged you for the bounced check. (set up as an “other charge” item, coded to the account "bank charges".)
When the invoice is paid, this charge will offset the charge you entered in step 2 above.
If you are re-depositing the original check, go through receive payments and use the new invoice. In the memo field type "redeposit" of ck #xxxx. Note that the customer will still owe you the bank fee and your own fee if applicable*.
*If you charge your own fee, you must set up a new Other Charge item, such as “MY BUSINESS FEE”, and code it to Other Income.
Then when the new invoice is paid, you will have cleared the accounts receivable, offset the withdrawal of the original bounced check, offset the bank charges, earned something for your trouble and MOST IMPORTANTLY, you have NOT recorded a new sale for this specific charge.