Rustler’s Quickbooks Tips

Bounced Checks happen, when they do there are several things that must be done. The original deposit has to backed out of the checking account, the fee the bank charges has to be entered as a withdrawal (credit) to the bank account, you have to re-invoice the person who bounced the check, and you should add to that invoice the bank fee and any other handling fee you impose.

Set up an income account called “Bad Check Charges”, if your business does not charge more than the bank charged you for the bad check you do not need this item

Several items need to be set up.

An “Other Charge” item called “Bad Check”, make the item non-taxable, leave the amount blank, and select your bank account in the account field, in the description block enter “Check returned NSF”.

An “Other Charge” item called “Bad Check Fee”, make the item non-taxable, leave the amount blank, and select your bank account in the account field, in the description block enter “Bank Service Charge”.

An “Other Charge” item called “Bad Check Charge”, leave the amount blank, set it to non-taxable, and select your new income account (Bad Check Charges) in the account field, in the description block enter “Bad Check Handling Charge”. If your business does not charge more than the bank charged you for the bad check you do not need this item or the income account set up in the beginning - decision point as to whether the added work is worth charging for.

When you get a bad check returned from the bank, it also tells you the amount of the bad check charge your bank charged you.

Create an invoice, select the customer:

Line 1: enter the Other Charge item “Bad Check” and the amount of the check that bounced.

Line 2: enter the Other Charge item “Bad Check Fee” and the amount the bank charged you

Line 3: enter the Other Charge item “Bad Check Charge” and the amount your company charges for handling bad checks (note that if you do not charge more than the bank does this line and the associated item does not need to be used)

Send the invoice.

What happens:
The Other Charge item “Bad Check” credits your bank account for the amount of the check, basically reversing the original deposit.

The Other Charge item “Bad Check Fee” credit your bank account for the amount of the service fee charged by the bank, and it will show up as a seperate item in the reconciliation as it will on the bank statement, and your bank balance will be correct.

The Other Charge item “Bad Check Charge” will account for the income from the charge when the total amount is received and the total amount received will go to undeposited funds as with any other receipt. This assumes you charge an additional charge for having to deal with a bounced check.