Customer check returned by bank uncashed. It can be returned for any reason, usually NSF, but could be account closed, account can’t be found, irregular signature or other.

Use a journal entry to add the amount back to the customer receivable and deduct it from the bank. Do not go back and change your deposit and take the check returned by the bank out of the deposit. You need your original deposit to remain as it so you can reconcile your bank statement.

Example of journal entry:

Go to make a journal entry.

Credit the bank account that the check was originally deposited into, in the memo make a notation of why the check is being returned. Debit the Accounts Receivable for the customer whose check was returned, in the memo make a notation of why the check is being returned, add the Customer Name. You can also add any bank charges to the journal entry by crediting the bank account and debiting bank charges.

This will allow you to keep your deposit in tack and clear it in your bank reconciliation. It will also allow you to clear the returned check on the bank statement and the bank fees.

Once the customer repays the amount, you will receive it just like normal. 

If the new check is returned, you can again make the same journal entry to show the amount outstanding on the customer’s account and deducting the amount out your checking account.