Dealing with returned checks can be a headache, but knowing how to properly record them in QuickBooks Desktop is crucial for maintaining accurate financial records. This guide will walk you through the process step-by-step, ensuring you handle returned checks efficiently and avoid potential accounting errors.
Understanding Returned Checks
Before diving into the recording process, let's clarify what a returned check is. A returned check, also known as a bounced check, is a check that your bank refuses to pay because the payer's account lacks sufficient funds. This leaves you with a payment that hasn't cleared, creating a discrepancy in your accounting records.
Steps to Record a Returned Check in QuickBooks Desktop
Here's a comprehensive guide on how to properly record a returned check in QuickBooks Desktop:
Step 1: Identify the Original Transaction
First, locate the original transaction in QuickBooks where you initially deposited the check. This is usually found in the banking section, under your register. You'll need to know the date, amount, and the customer or vendor involved.
Step 2: Void the Original Deposit
Crucially, you don't simply delete the original deposit. Instead, you need to void it. This is done by right-clicking the deposit transaction and selecting "Void." This removes the deposit from your records, clearing the way for the correct entry.
Step 3: Record the Check as NSF (Non-Sufficient Funds)
After voiding the original deposit, you'll need to create a new transaction to reflect the returned check. This is typically recorded as an NSF check. Here's how:
- Go to the Banking Center: Navigate to the banking center in QuickBooks.
- Select the Correct Account: Ensure you're working with the correct bank account.
- Create a New Transaction: Choose the "Make a Deposit" option. You won't be depositing funds. Instead, you'll use this to add the negative entry.
- Enter the Details:
- Date: Use the date the bank notified you of the returned check.
- Payment Method: Select "Check."
- Payee: The customer or vendor who wrote the bad check.
- Amount: Enter the amount of the check as a negative figure (e.g., -$100).
- Memo: Clearly write "NSF Check" or a similar description, along with any relevant information, such as the check number.
- Save the Transaction: Save the new transaction.
Step 4: Reconcile Your Bank Account
After recording the returned check, reconcile your bank account. This is a critical step to ensure your QuickBooks data matches your bank statement.
Handling Returned Checks: Best Practices
- Communicate with the Customer: Contact the customer or vendor who issued the bad check immediately to resolve the issue.
- Charge NSF Fees: Some banks charge fees for returned checks. Record these fees separately in QuickBooks.
- Implement Preventative Measures: Review your clients' payment history to identify potential risks and consider implementing stricter credit checks. If many checks bounce, you might want to switch to electronic payment methods.
- Keep Records: Maintain meticulous records of returned checks, including all communication and fees.
By following these steps, you can accurately record returned checks in QuickBooks Desktop, keeping your financial records clean and accurate. Remember, consistency is key to successful accounting practices. If you encounter any persistent issues, consider seeking assistance from a QuickBooks professional or accountant.
