How to Record Returned Check in Quickbooks Online

How to Record Returned Check in QuickBooks Online

In business, there are times when customers may issue checks that eventually get returned due to insufficient funds or other reasons. When this happens, it’s important to accurately record the returned check in your accounting software, such as QuickBooks Online. QuickBooks Online provides an easy and efficient way to record returned checks, ensuring that your financial records are up to date and accurate. In this article, we will explain step by step how to record a returned check in QuickBooks Online and answer some common questions related to this process.

Step 1: Create a New Bank Deposit
To record a returned check, start by creating a new bank deposit in QuickBooks Online. Go to the “+” sign on the top right corner of the dashboard and select “Bank Deposit” under the “Other” category.

Step 2: Select the Bank Account
Choose the bank account where the original payment was deposited from the “Account” drop-down menu. Make sure to select the correct bank account associated with the returned check.

Step 3: Enter the Date and Memo
Enter the date of the returned check and add a memo to help you identify the transaction later on. The memo can include details such as the customer’s name and the reason for the returned check.

Step 4: Add a New Line Item
Click on “Add New Deposits” and select the customer who issued the returned check from the “Received From” drop-down menu. Enter the amount of the returned check as a negative number in the “Amount” field.

Step 5: Save the Deposit
Once you have entered all the necessary information, click on “Save and Close” to save the deposit transaction.

Common Questions and Answers:

1. Can I record a returned check in QuickBooks Online without creating a bank deposit?
No, you need to create a bank deposit to accurately record the returned check in QuickBooks Online.

2. What if the returned check was issued by a vendor instead of a customer?
You can still follow the same steps mentioned above to record a returned check issued by a vendor. Just select the vendor’s name instead of the customer’s name in the “Received From” drop-down menu.

3. Can I track the returned check separately from the original payment in QuickBooks Online?
Yes, you can add a specific memo or note to the returned check transaction to differentiate it from the original payment. This will help you easily identify and track returned checks in the future.

4. Can I automatically reconcile the returned check in QuickBooks Online?
No, you will need to manually reconcile the returned check with your bank statement. Make sure to mark the returned check as cleared in the reconciliation process.

5. What if the customer issued multiple checks that got returned?
If a customer issued multiple checks that were returned, you will need to record each returned check separately by creating multiple bank deposits in QuickBooks Online.

6. How do I handle the fees associated with returned checks?
If your bank charges you fees for returned checks, you can create a separate expense transaction to record these fees in QuickBooks Online. Categorize the expense under the appropriate account, such as “Bank Service Charges.”

7. Can I void the original payment in QuickBooks Online when a check is returned?
No, you should not void the original payment when a check is returned. Instead, record the returned check as a separate transaction to maintain accurate financial records.

8. How can I prevent returned checks in the future?
To prevent returned checks, consider implementing policies such as requiring electronic payments or using a check verification service. Additionally, regularly monitoring customer payment history can help identify potential issues before accepting checks.

9. Can I send a notification to the customer when their check is returned in QuickBooks Online?
Yes, you can send an email or a letter to the customer notifying them about the returned check. QuickBooks Online provides templates for such notifications that you can customize and send directly from the software.

10. How do I handle returned checks for sales tax payments in QuickBooks Online?
If a customer’s check for sales tax payments is returned, you will need to record it as a separate transaction and adjust your sales tax liability accordingly. Consult your accountant or tax professional for guidance on handling sales tax payments.

11. How long should I keep records of returned checks?
It is recommended to keep records of returned checks for at least seven years for tax and audit purposes. Storing electronic copies of returned checks in QuickBooks Online or a secure cloud storage system can help ensure you have access to these records when needed.

In conclusion, recording returned checks in QuickBooks Online is essential for maintaining accurate financial records. By following the step-by-step process outlined above and keeping track of the common questions and answers provided, you can efficiently record returned checks and effectively manage your business finances.

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