Has your bank reported to you that a cheque has bounced? Which bank account was it? In order to take care of that in the book we need to set it up first. From an accounting perspective, we know that the cash in the bank goes down by the amount of the bounced cheque plus the bank’s service fee. We also know that the person who wrote the cheque still owes us the money. assuming it was a customer, we know that accounts receivable goes up. Also, you should add a service fee on top of that.

We have three things we must do.

1. Decrease the bank account and increase the accounts receivable.
2. Record the bank fee.
3. Charge your customer a service fee for managing the bounced cheque, that’s at least the amount of the bank fee.

We need to add an item to the list of Products and Services and connect that to the bank account that was affected by the bounced cheque. We can call it something like Customer’s Returned NSF Cheque. It will be a Service item.

In the top right click the Cog Wheel and go to the column called Lists. Click Products and Services. We can see all of our products and services listed. Click New. At the bottom right side of the screen we need to choose an account. Choose the bank account that was affected by the NSF cheque. Of course you will also need to give it a name. It does not get connected to an income account. It gets connected to a bank account.