How to Record a Bounced Check in Quickbooks Online

How to Record a Bounced Check in QuickBooks Online

Managing finances is an essential aspect of running a business, and sometimes, despite your best efforts, a check you receive may bounce due to insufficient funds in the payer’s account. When this happens, it is crucial to record the bounced check properly in your accounting software to ensure accurate financial records. In this article, we will guide you through the process of recording a bounced check in QuickBooks Online, along with answers to some common questions.

Step 1: Create a Bounced Check Expense Account
Before recording the bounced check, you need to set up an expense account specifically for this purpose. To do this in QuickBooks Online, follow these steps:

1. Go to the Chart of Accounts: Click on the Gear icon and select Chart of Accounts.
2. Click on the New button.
3. Choose Expense as the account type.
4. Enter a name for the account, such as “Bounced Check Expense.”
5. Save the account.

Step 2: Record the Bounced Check
Once you have created the bounced check expense account, you can proceed to record the bounced check in QuickBooks Online:

1. Go to the Create (+) button and select Bank Deposit.
2. Choose the bank account where the bounced check was deposited.
3. In the Add funds to this deposit section, enter the original amount of the bounced check as a positive number.
4. In the Add new funds section, select the Bounced Check Expense account you created earlier and enter the same amount as a negative number.
5. Save the deposit.

Common Questions and Answers:

Q1: What if I already recorded the original payment from the bounced check?
A1: In this case, you need to first locate the original payment entry and delete it. Then follow the steps mentioned above to record the bounced check.

Q2: Can I record multiple bounced checks in a single deposit?
A2: Yes, you can include multiple bounced checks in a single deposit by entering each check as a separate line item in the Add new funds section.

Q3: How do I handle bank fees associated with a bounced check?
A3: If your bank charges you a fee for a bounced check, you can create a separate expense account for bank fees and record the fee amount as a negative number in the Add new funds section.

Q4: What if the bounced check was received in a different currency?
A4: If the bounced check was received in a different currency, you need to convert the amount to your base currency at the current exchange rate before recording it.

Q5: Can I track bounced checks from specific customers?
A5: Yes, you can create a customer sub-account under the Bounced Check Expense account to track bounced checks from specific customers.

Q6: How do I know if a check has bounced?
A6: Typically, your bank will notify you of a bounced check. You may receive a physical notification or an electronic message informing you about the bounced payment.

Q7: Do I need to contact the payer of the bounced check?
A7: It is advisable to contact the payer to understand the reason for the bounced check and to discuss alternate payment arrangements.

Q8: How does recording a bounced check affect my financial statements?
A8: Recording a bounced check as an expense reduces your income and impacts your profit and loss statement. It also affects your bank account balance.

Q9: Can I apply the bounced check amount as a credit to the customer’s account?
A9: If you have an existing credit for the customer, you can apply it against the bounced check by creating a credit memo and linking it to the bounced check.

Q10: Should I use the “Void” function in QuickBooks Online to record a bounced check?
A10: No, it is not recommended to use the “Void” function to record a bounced check. Instead, follow the steps outlined above to ensure accurate financial reporting.

Q11: How long should I keep records of bounced checks?
A11: It is recommended to retain records of bounced checks for at least seven years for auditing and legal purposes.

By following the steps outlined in this article, you can accurately record a bounced check in QuickBooks Online and maintain a clear financial trail. Remember to consult with a professional accountant or bookkeeper for personalized guidance regarding your specific business needs.

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