Returned Checks
Reference Number: AA-00203 Views: 5909 Created: 2011-10-27 12:10 Last Updated: 2013-09-13 10:39 0 Rating/ Voters

This article describes how to account for customer checks that have been returned by your bank for insufficient funds (a "bounced check"), or other reasons.


You accept checks at the Point of Sale and deposit them on a regular basis. Your bank statements (or online bank transactions) match your daily deposit reports from Artisan. But once in a while a deposited check is returned by the bank. Usually, it is several days later, so you can't just subtract it from the day's deposit amount. You need to account for it specially in Artisan and in your external accounting program (e.g. QuickBooks), if any.

Besides subtracting the check amount from your bank account, the bank may also charge you a fee (the "bank fee"). You may or may not choose to charge a handling fee (for the same or different amount as the bank fee) to your customer, as well as attempting to recover the original amount by re-depositing the check or obtaining an alternate method of payment. (Getting a credit card by phone is a good approach.) All of these need to be accounted for in Artisan (and QuickBooks).

First-Time Setup

You will need some special Items and Categories in Artisan and some special accounts in your accounting program or ledger. Create these if they don't already exist. (The names used here are examples; you can change them if you want.)

  1. In Artisan, create a Category called "RC" ("Returned Check"), with "Non-Sales" set to "Y".
  2. Create an Artisan Item record with the same name, with "RC" as the Category Code, Vendor Code "NONE", Pricing Model "Fill-In Price at Time of Sale", and Inventory Tracking OFF.
  3. If you want to be able to charge customers a handling fee, create another Item & Category, "RCF" ("Returned Check Fee"), set up as above.
    If this fee will have a fixed price, use Pricing Model "Set Manually" instead, and set the Retail Price.
  4. Skip the remaining steps unless you use an external accounting program, like QuickBooks.
  5. In your external accounting program, find or add accounts for "Returned Check" (a contra Income account), "Returned Check Fee"--if you're going to use it--(an Other Income account), and "Bank Fee" (an Expense account).
  6. In Artisan, go to System Administration => Configuration Settings => Business & Financial Settings => Accounting Package Configuration. Set "Allow Category Overrides" for "Non-Sales Income Account" to "Y".
  7. In the Category Records you created in steps 1 - 3, go to "External Accounts..." and fill in the name or number of the corresponding account(s) from step 5 as the "External Account for Income" (leave the rest blank).

Entering a Returned Check in Artisan

When you receive a Returned Check notice from your bank, enter a new sale into Artisan:

  1. Enter a new sales transaction for this customer.
  2. Add an "RC" item with the amount of the check.
  3. If you want to charge a fee, add an "RCF" item.
  4. Finalize the sale with an "On Account" payment type, to collect payment later (as a payment on this  Invoice). Or use another payment type if you were able to obtain payment right away.

Accounting for the Returned Check in QuickBooks

  1. Download online banking transactions, or manually create a journal entry to subtract the Returned Check amount and Bank Fee, if any, from the bank account.
  2. For the returned check amount, use "Returned Check" as the "expense" account. The subsequent export/import from Artisan will balance this out.
  3. For the bank fee, use "Bank Fee" as the expense account. This is a true expense, outside of Artisan.

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