How to Record a Bounced Check in QuickBooks: Step-by-Step Guide

Knowing how to record a bounced check in QuickBooks starts with understanding what the correct entries are supposed to accomplish. Before recording a bounced check in QuickBooks, it helps to understand what the correct entries are supposed to accomplish. A bounced check from a customer creates a specific accounting problem: your bank account was credited when you deposited the check, but the money was taken back when the bank returned it. Your books show money you do not actually have.

Correctly recording a bounced check in QuickBooks does four things:

  • Reduces your bank balance by the amount of the returned check, matching what your bank statement shows
  • Increases Accounts Receivable by the same amount, because the customer still owes you
  • Reopens the original invoice, changing its status from Closed to Open so the customer's outstanding balance is accurate
  • Preserves the audit trail , the original payment transaction stays in your records, which is important for reconciliation and tax purposes

There are two approaches in QuickBooks Online for recording a customer's bounced check: the expense method and the journal entry method. Both reach the same result. The expense method is simpler and is recommended for most businesses.

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QuickBooks Online: Expense Method (Recommended)

Step 1: Record the Expense for the Bounced Amount

  1. Go to + New and select Expense under Vendors.
  2. In the Payee field, select the customer whose check bounced. (Yes, you are creating a vendor expense with a customer as the payee , this is correct.)
  3. In the Payment Account field, select the bank account where you originally deposited the check.
  4. Set the Payment Date to the date the bank returned the check (shown on your bank statement).
  5. In the Ref No. field, type NSF or the bounced check number for reference.
  6. In the Category details section (not Item details), select Accounts Receivable (A/R) from the Category dropdown.
  7. Enter the full amount of the bounced check in the Amount field.
  8. In the Customer column on that same row, select the customer who gave you the bounced check.
  9. Click Save and Close.

This expense reduces your bank balance and increases accounts receivable bounced check entries, which is the correct accounting effect of a returned check.

 

Step 2: Reopen the Original Invoice

  1. Go to All apps, then Customer Hub, then Customers.
  2. Find and click the name of the customer whose check bounced.
  3. In the transaction list, find the original payment transaction (not the invoice). Click it to open.
  4. You will see the original invoice checked in the Outstanding Transactions section.
  5. Uncheck the box next to the original invoice.
  6. Check the box next to the expense you just created in Step 1.
  7. Click Save and Close.
  8. When QuickBooks asks if you want to proceed because the transaction is linked to others, click Yes.

The original invoice status now shows as Open or Overdue, meaning the customer owes you the full original amount again.

 

QuickBooks Online: Journal Entry Method

Use the journal entry method when your accountant specifically recommends it, when the original payment was not linked to an invoice, or when the Accounts Receivable subledger requires precise manual control. The steps are more involved than the expense method but achieve the same accounting result.

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Step 1: Create the Journal Entry

  1. Go to + New and select Journal Entry under Other.
  2. Set the Journal Date to the date the check bounced.
  3. On the first line, select Accounts Receivable from the Account dropdown. Enter the bounced check amount in the Debits column. Select the customer in the Name column. Add a memo such as NSF check #[number] from [customer name].
  4. On the second line, select your bank account from the Account dropdown. The matching credit amount should populate automatically in the Credits column.
  5. Click Save and Close.

 

Step 2: Relink the Payment to the Journal Entry

  1. Go to Customers and open the customer's transaction list.
  2. Find and open the original payment transaction.
  3. Uncheck the original invoice. Check the journal entry you just created.
  4. Click Save and Close and confirm when prompted.

The invoice is now reopened and linked to the journal entry. The journal entry links to the original payment, creating a clean audit trail.

 

How to Record the NSF Bank Fee in QuickBooks

Your bank charges an NSF fee recording entry when a deposited check bounces. This fee appears on your bank statement as a debit and must be recorded separately from the bounced check entry.

  1. Go to + New and select Expense under Vendors.
  2. In the Payee field, select your bank (or create it as a new vendor if it is not already in your list).
  3. In the Payment Account field, select the bank account that was charged.
  4. Set the Payment Date to the date the fee appeared on your bank statement.
  5. In the Ref No. field, type NSF fee.
  6. In the Category details section, select Bank Charges (or Bank Service Charges) from the Category dropdown.
  7. Enter the fee amount your bank charged.
  8. Add a memo: NSF fee for returned check from [customer name], check #[number].
  9. Click Save and Close.

 

How to Charge the Customer for the Bounced Check Fee

You are not required to absorb the cost of a customer's bounced check. Most businesses charge the customer the same amount or slightly more than what the bank charged them. State law caps the maximum returned check fee a business can charge , typically $20 to $40 depending on your state.

 

Step 1: Create a Service Item for Returned Check Fees

  1. Go to All apps, then Sales and Get Paid, then Products and Services.
  2. Click New and select Service.
  3. Name the item Returned Check Fee or NSF Fee.
  4. Check the I sell this product/service box.
  5. Select an appropriate income account (such as Other Income or Bank Charges Recovered).
  6. Click Save and Close.

 

Step 2: Invoice the Customer for the Returned Check Fee

  1. Go to + New and select Invoice under Customers.
  2. Select the customer whose check bounced.
  3. Set the Invoice Date to the date the check was returned.
  4. In the Product/Service column, select the Returned Check Fee item you just created.
  5. Enter the amount you want to charge the customer.
  6. Add a memo: Returned check fee for check #[number] dated [date].
  7. Click Save and Send to email the invoice to the customer.

After this step, the customer has two open invoices: the original invoice that was reopened and the new invoice for the returned check fee.

 

How to Send a Customer Statement After a Bounced Check

Once the original invoice is reopened and the NSF fee invoice is created, send the customer a statement showing both outstanding amounts. A statement is more effective than sending two separate invoices because it shows the customer their complete balance in one document.

  1. Go to Customers and select the customer.
  2. Click New Transaction and select Statement.
  3. Choose Balance Forward as the statement type to show all open balances.
  4. Set the statement date to today and a start date that covers both open invoices.
  5. Click Save and Send to email the statement.

The statement shows the customer that they owe the original invoice amount plus the returned check fee. Include a brief note in the email body referencing the bounced check and requesting prompt payment.

 

How to Reconcile a Bounced Check in QuickBooks

Reconciling a bounced check in QuickBooks can confuse people because the bank statement shows it as two entries: the original deposit (positive) and the NSF return deduction (negative). Your QuickBooks bank register should also show two entries: the original deposit and the NSF expense you created.

 

What to Match During Reconciliation

  • Original deposit: The deposit transaction in QuickBooks should match the original deposit line on your bank statement. Check it off in the reconciliation screen.
  • NSF return: The expense you created to record the bounced check (Step 1 of the expense method) should match the NSF return deduction on your bank statement. Check it off.
  • NSF bank fee: The expense you created for the bank fee should match the fee entry on your bank statement. Check it off.

When all three are checked, they account for the complete bounced check event on your bank statement. The net result in your cleared items is zero gain from the bounced check (deposit offset by return) plus the expense of the bank fee. This is the correct reconciliation outcome.

For a complete guide to bank reconciliation in QuickBooks, see our checkbook management and reconciliation guide.

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QuickBooks Desktop: How to Record a Bounced Check

QuickBooks Desktop bounced check recording uses a built-in Record Bounced Check feature that automates most of the steps required in QuickBooks Online. This feature is available in QuickBooks Desktop Pro, Premier, Enterprise, and Accountant editions.

 

Prerequisites for the Record Bounced Check Feature

  • You must be in single-user mode
  • The payment method must be set to Check (not ACH or credit card)
  • The check must have been deposited to the bank account (not sitting in undeposited funds (Undeposited Funds account))

 

Steps to Record a Bounced Check in QuickBooks Desktop

  1. Go to the Customers menu and select Receive Payments.
  2. Find and open the payment transaction for the check that bounced.
  3. Click the Record Bounced Check button in the toolbar at the top of the Receive Payments window.
  4. In the Manage Bounced Check window, enter the Bank Fee amount and the fee date.
  5. Select the expense account for the bank fee (Bank Service Charges is standard).
  6. Optionally, enter the Customer Fee , the amount you want to charge the customer for the bounced check.
  7. Click Next to preview the transactions that QuickBooks will create.
  8. Click Finish.

QuickBooks Desktop automatically creates all necessary entries: it reverses the original payment, marks the invoice as unpaid, creates a bank service charge expense for the NSF fee, and creates a new customer invoice for any fee you chose to charge. No manual relinking is required.

 

If the Record Bounced Check Button Is Not Available

The button is greyed out or missing when the payment method is not set to Check. Open the payment, change the method to Check, and try again. If the check is still in Undeposited Funds rather than deposited to a bank account, you will need to complete the deposit first before the feature becomes available.

 

Recording a Check You Wrote That Bounced

The steps above for how to record a bounced check in QuickBooks cover a customer giving you a bad check. A different situation is when a check you wrote to a vendor or employee is returned because your own account had insufficient funds. This is a different accounting problem with different entries.

 

What Happens When Your Own Check Bounces

When a check you wrote bounces, your bank charges you an NSF fee. The vendor or employee who tried to cash the check does not receive payment. The bill or payroll entry in your books still shows as paid even though it is not. You need to:

  1. Record the NSF fee your bank charged you as an expense (Bank Charges category)
  2. Reopen the bill or payroll entry that the check was applied to
  3. Reissue payment to the vendor or employee using a new check number

 

How to Reopen a Bill After Your Own Check Bounces in QuickBooks Online

  1. Go to Expenses, then Vendors, and open the vendor's transaction list.
  2. Find the bill payment check that bounced and open it.
  3. Note the bill it was applied to, then delete or void the bill payment check. (In this case, voiding or deleting the bill payment is appropriate because the payment never actually cleared the bank.)
  4. The bill returns to an unpaid status automatically.
  5. Record the NSF fee as a separate expense with Bank Charges as the category.
  6. Issue a new bill payment with a fresh check number once your account has sufficient funds.

For more on voiding checks in QuickBooks Online, see our complete guide at how to void a check in QuickBooks Online.

 

How to Reissue Payment After a Bounced Check

After completing how to record a bounced check in QuickBooks and resolving the accounting entries, you may need to reissue payment to the vendor or employee whose check bounced. When reissuing, follow these rules:

  • Always use a new check number. Never reuse the number from the bounced check. Reusing numbers creates confusion in your check register and breaks bank reconciliation best practices. Record the new check number in QuickBooks when creating the replacement payment.
  • Reference the original in the memo. Add a note such as Replaces bounced check #[original number] dated [date]. This creates a clear link in your records between the bounced check and its replacement.
  • Confirm your account balance before writing the replacement. A replacement check written before your account has sufficient funds will bounce again, doubling the fees and the problem.
  • Use quality MICR check stock. Some checks bounce not because of insufficient funds but because of MICR encoding errors in the check stock. A routing number printed in non-certified toner, or an incorrect routing number, causes bank reader-sorter machines to reject the check even when your account balance is sufficient. Using check stock from a manufacturer that pre-verifies routing numbers eliminates this cause of return entirely.

For QuickBooks-compatible check stock with MICR pre-verified against the Federal Reserve E-Payments Routing Directory, see QuickBooks checks at Checkomatic. For the full business check range, see business checks.

For more on how MICR encoding works and why it matters for bank clearing, see our ABA routing numbers guide.

 

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Frequently Asked Questions

How do I record a bounced check in QuickBooks Online?
To record a bounced check in QuickBooks Online using the expense method: go to + New, select Expense, choose the customer as payee, select the bank account as payment account, set the date to when the check was returned, choose Accounts Receivable as the category, enter the bounced amount, select the customer in the Customer column, and save. Then go to the customer's transaction list, open the original payment, uncheck the invoice, check the new expense, and save. The invoice reopens. Record the NSF bank fee as a separate expense using Bank Charges as the category. For more on how check register codes work, see our check register guide.
What is the difference between the expense method and journal entry method?
The expense method is simpler and works for most businesses. You create an expense to Accounts Receivable, then relink the payment to that expense. The journal entry method achieves the same result but requires manually debiting AR and crediting the bank account in a journal entry. Use the expense method unless your accountant recommends otherwise. The journal entry method is sometimes preferred when the original payment was not linked to a specific invoice, or when your accountant wants precise control over the AR subledger entries.
How do I record a bounced check in QuickBooks Desktop?
In QuickBooks Desktop, go to Customers, Receive Payments, find the payment, and click Record Bounced Check in the toolbar. Enter the bank fee, select the expense account, optionally enter a customer fee, and click Finish. QuickBooks Desktop creates all entries automatically. If the Record Bounced Check button is greyed out, confirm the payment method is set to Check and the check has been deposited (not sitting in undeposited funds (Undeposited Funds account)).
Can I charge my customer for the bounced check fee?
Yes. Create a service item called Returned Check Fee or NSF Fee, assign it to an income account, then create a new invoice for the customer with that item and the amount you want to charge. Most states cap the maximum returned check fee a merchant can charge at $20 to $40. The customer will then have two open invoices: the original reopened invoice and the new fee invoice. Send a Balance Forward statement showing both. For more on check types and NSF terminology, see our check types and terminology guide.
What happens to my accounts when I record a bounced check in QuickBooks?
Bank balance decreases by the bounced check amount. Accounts Receivable increases by the same amount. The original invoice changes from Closed to Open. The original payment transaction stays in your records for audit purposes. The NSF bank fee is recorded as a separate bank charge expense. Everything that happens in your bank account appears as a matching transaction in QuickBooks, making reconciliation possible.
How do I reconcile a bounced check in QuickBooks?
During reconciliation, your bank statement shows the original deposit and a separate NSF return deduction. In QuickBooks, check off the original deposit transaction and the NSF expense transaction as cleared items. Also check off the NSF bank fee expense. All three should match entries on your bank statement. When all three are cleared, the net effect is correct: the deposit and return cancel each other, and only the bank fee remains as a net cost. For reconciliation guidance, see our checkbook management guide.

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