Most companies will eventually deal with the customer who bounces a check. To make your reconciliation an easier task, we suggest the following procedure:
How to handle return checks from customers.
• Create an Other Charge Item called Bounced Check or NSF. In the description field I usually say something like "Your check # has been returned, please remit replacement payment immediately." For the Account enter your Checking account.
• Now, Invoice the customer for the Item Bounced Check and enter in the check #, Invoice # and other information about the check. This takes the money out of your checking account and puts it back on the customer A/R
• I usually also create an Other Charge Item called NSF Fee and charge my customer for any service charge I received from my bank. You can put this to your account for Bank Service Charges to offset what your bank charged you or to a Misc. Income account.
• When the customer sends a replacement check, Receive Payment as usual and make your deposit.
Despite the temptation, you really don't want to delete the returned check from the original deposit.
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