How-to · Customers and sales
How to record a bounced check (NSF cheque)
When a customer's check bounces, undo the payment: credit the bank account for the amount the bank took back and debit Accounts Receivable, so the invoice is open again. Record the bank's NSF fee as an expense, and if you charge the customer a returned-check fee, invoice it separately.
How-to guides / Bounced check (NSF)
The accounting behind it
A deposited check that comes back unpaid means the money never really arrived. Your bank balance is too high by the amount of the check, and the customer still owes you. The fix moves the amount back out of the bank and back onto the customer's balance in accounts receivable.
Don't delete or void the original payment. It really happened, and it is on your bank statement along with the reversal. Keeping both lines makes the bank reconciliation match the statement.
The bank usually charges you a fee for the returned item. That fee is your expense, whatever you later recover from the customer. Any fee you pass on to the customer is income, billed on its own invoice.
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable (customer) | Check amount | |
| Bank | Check amount |
| Account | Debit | Credit |
|---|---|---|
| Bank Service Charges | Fee | |
| Bank | Fee |
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable (customer) | Fee | |
| Returned check fee income | Fee |
Worked example: a $1,200 check comes back
Harbour Design paid invoice 1045 with a $1,200.00 check, which you deposited on March 3. On March 8 the bank returns it marked NSF, takes back the $1,200.00 and charges you $15.00. Your terms allow a $25.00 returned-check fee, so you bill the customer for it.
After the entries, the bank is down $1,215.00 from what you had recorded, invoice 1045 is open again for $1,200.00, and a new $25.00 invoice is due. When the customer pays by certified cheque or e-transfer, record it with Receive Payment as usual.
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable (Harbour Design) | $1,200.00 | |
| Bank Service Charges | $15.00 | |
| Checking | $1,215.00 |
| Account | Debit | Credit |
|---|---|---|
| Accounts Receivable (Harbour Design) | $25.00 | |
| Returned check fees (income) | $25.00 |
Common mistakes
- Deleting the original payment. Your statement shows a deposit and a reversal; your books should too.
- Forgetting the bank fee, so the reconciliation is off by $10 to $50 every time.
- Charging the customer a fee your terms or local law don't allow. Returned-check fee limits are set by state and provincial rules, not one national number.
- Accepting another personal check from the same customer straight away. Many businesses ask for a certified cheque, money order or electronic payment next time.
In the US and in Canada
United States
Banks call it a returned item, NSF (non-sufficient funds) or a bounced check. Whether and how much you can charge the writer is set by state law, so check your state's rule before adding a fee.
Canada
Canadian banks return the item as an NSF cheque. The entries are the same. If the original sale charged GST/HST, nothing changes on the tax side: the sale still happened and the customer still owes it.
In AcboBooks
AcboBooks 0.2.1 has a dedicated step for this on the Receive Payment screen. It posts all three parts in one go.
- Open Receive Payment. Go to Customers → Receive Payment and click Bounced Check… at the top of the screen.
- Pick the payment. Under Payment that came back, choose the customer payment that bounced.
- Enter the bank details. Fill in Date returned and Bank account it was taken back from. Type the bank's charge in Bank's NSF fee; the Expense account for it defaults to Bank Service Charges.
- Charge the customer (optional). Type your returned-cheque fee in Charge the customer and choose the Income account for the fee. AcboBooks invoices it to the customer, due today.
- Record it. Click Record Bounced Check. The payment is reversed, the invoices it paid are reopened, and the fee is expensed. The transaction shows as Returned Check.
When the customer pays again, use Receive Payment as normal and apply it to the reopened invoice.
Menu names are from AcboBooks 0.2.1. Not using it yet? Try it free for 15 days, with the sample company to practise on.
Questions
Should I void the original payment instead?
No. Voiding makes it look as if the deposit never happened, but it is on your bank statement. Record the reversal as a separate entry dated the day the bank took the money back, so both lines match the statement.
Where does the bank's NSF fee go?
To an expense account such as Bank Service Charges. It is your cost even if you recover a fee from the customer; the recovered fee is recorded as income on its own invoice.
What if the check bounces after I closed the month?
Date the reversal on the day the bank returned it, which is usually in the current, open month. You don't need to reopen the closed period.
Can I redeposit the same check?
Some banks redeposit automatically or let you try again. If it clears the second time, record it as a new payment against the reopened invoice on the day it clears.
Related how-to guides
Terms used here
- How to collect overdue invoices
- How to write off a bad debt
- How to reconcile a bank account
- Invoicing in AcboBooks
Updated October 25, 2026. General bookkeeping information, not tax, legal or accounting advice. Rules differ by state and province and change over time; check with the IRS, the CRA or your accountant for your own situation.
Get started
Entries like this, done in the right screen.
AcboBooks is desktop accounting for US and Canadian small businesses, bought once and kept on your own PC.
No card. No account. Nothing to cancel.