QUICKBOOKS: Where Does The Invoice Go?

A QuickBooks client asked: When you receive an NSF check, the recommended method is to reissue the invoice plus any NFS charges. Does this also correct your accounts receivable detail?

This question asks if the original invoice paid by the NSF check needs to be adjusted in some way to assure that the A/R Trial Balance matches the G/L Trial Balance amount for Accounts Receivable.

There are several issues to be considered to answer this:

* Does your customer want you to redeposit the check (in this case, you would invoice only for Bank Charges or, more often, simply expense them)

* Are you using accrual or cash basis accounting (this affects which accounts were posted to when entering the payment)

* How does your company handle NSF charges in general (post to a NSF Income account, post to an expense account, post to a contra-income account?)

Once you have considered the accounting practices you use, then you can apply the correct method to handle a NSF check issued as a payment by a customer. For example, we will assume that we are using the accrual method, that we do not charge customer for NSF bank charges and post them to an expense). A typical scenario follows:

* Invoice Issued > Invoice Paid
* Payment applied in Quickbooks > Open invoice cleared
* Bank returns check as NSF > Customer asks you to resubmit
* Check clears on resubmit > Cash applied to checking account
* Bank statement is reconciled > NSF charge is posted to Bank Charges via J/E

In this case, there is no need to adjust the invoice paid because it was paid by the second submission of the check. As long as this happened within the same accounting period, then no adjustment would be needed. As far as the Bank Charge for the NSF check, it is not typical to charge a customer for this (unless they are consistently delinquent). So this would be expensed with the other bank charges at month-end.

If you still have questions, you should contact your QuickBooks ProAdvisor or your accountant.