Use these instructions to process a customer's check that is returned to you due to insufficient funds. Use the Adjusting Journal Entry window (in the General Ledger module) and the Customer Balance Posting window (in the Accounts Receivable module) to reverse the cash that was deposited and returned.
Important: An adjusting journal entry is required since these instructions use the Customer Balance Posting window, which does not affect the General Ledger.
- Create an adjusting journal entry to reduce the cash balance for the appropriate cash account using a date that is appropriate. (If you deposited the check in February and the check was returned in March, you probably want to date the entry using a March date.) The credit would be to cash and the debit would be to your accounts receivable trade account.
- The above entry takes care of the General Ledger, but you also need to put this amount back into the customer’s outstanding balance. Enter the following information in the Customer Balance Posting window:
- Invoice Number—You must use a unique invoice number (the original invoice number cannot be re-used)
- Invoice Date—The date should be the same as the adjusting journal entry, so when you run an Invoice Aging Report for this time period, it will agree with the General Ledger balance
- Remaining Amount Due—Enter the amount of the return (you do not need to create a separate line item for each paid invoice)
- Job Number—This is necessary for the system to identify the aging report in which to include this balance posting item
- When a new check arrives, you then have an “invoice” that it can be applied to.
Note: If the amount becomes uncollectible, you must write it off as a bad debt. For more information, see Writing Off a Bad Debt.